The ructions in coking coal, a key ingredient in steel-making, are making waves elsewhere in the industry.

The price of higher grade Australian thermal coal, which is used to generate electricity in power stations, has risen to $80 a tonne for the first since in January 2014, writes Neil Hume in London.

Encouraged by high prices traders say some Australian producers are looking to sell some of their output to steel mills. Mines in Hunter Valley, New South Wales, a key producing regional, also produce lower qualilty coking coal alongside thermal coal.

These moves are exacerbating a supply squeeze in the thermal coal market. This has been caused by China’s decision to restrict the number of working days at its domestic mines.

As buyers scramble for coal, prices are rising. Last week a November-loading cargo of Australian thermal coal with an energy content of 6,000 kcal/k tonnes changed hands at $81 a tonne, according to Argus Media.

The gains are good news for big coal producers such Anglo American and Rio Tinto although less so for Glencore, which has hedged a large chunk of its production at much lower prices.

The increase in thermal coal prices comes as Australian producers and Japanese consumers haggle over supply agreements for the fourth quarter. These negotiations will the benchmark price for contracts over the next three months.

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