China is driving the demand with reports of a 12.5% increase in domestic hard coking coal prices from late October to $US182/t.

“A US coking coal supplier has reportedly concluded a deal for 3.7 million tonnes of hard coking coal into China on a quarterly pricing basis, with the first quarter of 2010 set at $190 per tonne free on board,” Macquarie said in a commodities report.

“This compares with recent deals at just above $180 per tonne FOB.”

Estimating a $50/t freight price from the US to China, the investment bank can see Australian coal exports to the southern regions of China as competitive while noting this has been the case for Indonesian exports for some time.

Looking at thermal coal, Macquarie said the Qinhuangdao benchmark thermal coal price at 5500 kilocalories per kilogram was trading at 720-730 yuan per tonne FOB ($US105-107/t), up 4.3% from the past week and 12.5% for the month.

Macquarie said these hikes might reflect recent cold weather and temporary disruptions to supply.

The analysts came back with bullish views from the McCloskey coal conference in Bali.

“The general mood of the conference was positive, with the majority of the participants of the view that the 2010 Japanese coal settlement could be done around $80-85 per tonne (around current spot price levels FOB Newcastle),” Macquarie said.

“The underlying sentiment was that the high levels of Chinese coal imports this year could be sustained going forward, given the recent rally in the Chinese domestic coal price combined with increasing coal demand over the winter period.”

While annual coal contract prices fell by up to 63% this year, the unprecedented spike in Chinese demand since March is likely to force higher benchmarks for the next Japanese financial year, starting in April.

The reported US deal at $190/t is 47% higher than the $129/t premium coking coal benchmark set this year.