Uncertainty about coal prices is set to dog Australian producers for the next 2-3 months as they grapple with Japanese coal buyers for higher prices. With optimism about steaming coal prices dimming, all eyes are focusing on the coking coal market with a view to it providing some positive news for local coal exporters. Australia accounts for about 52% of the world’s 170 million-tonnes-per-annum seaborne traded coking coal market.

With rising steel production in major coal importing countries such as Japan pointing to higher hard coking coal demand, the Australian industry went into the current round of negotiations feeling reasonably confident about its bargaining position.

However, several analysts and commentators are suggesting Australian producers still have some key obstacles to overcome.

"To a certain extent Australia’s ability to press home its cost advantage is being frustrated by the consumer’s preparedness to pay higher prices for certain US and Canadian coals in order to maintain a diversity of supply," said one.

Demand for hard coking is also yet to catch up with the recent rise in steel production. A Sydney-based commentator observed: "Part of this lag is natural due to surplus capacity, however, some cynics may argue that to some degree it is also related to the current round of price negotiations.

"The strengthening steel market works in favour of the coal producers and we suggest that the miners could seek to prolong the negotiations and await further evidence of the improving trend in global steel prices and production, which has yet to flow through to coking coal demand. The current situation of excess supply also suggests that despite the 17% price cut in April 1999, the industry may be facing another albeit smaller price reduction next year."