Glencore extends rally after coal contract boost

Glencore hit a 15-month high on Tuesday after news emerged that it had agreed a much improved coal deal with an important Japanese buyer.

The FTSE 100 mining and commodities trading behemoth secured a price just shy of $95 per tonne for high-quality thermal coal from Tohoku Electric, close to a 50% improvement on the price one year ago the Financial Times reported overnight.

Coal prices have galloped higher in recent months on the back of China's new domestic policies to reduce coal consumption.

In order to improve profitability for its key coal, power utilities and steel sectors, while also cutting air pollution and carbon dioxide emissions, the Chinese government in April announced it would enforce lower coal capacity across the sector in 2016 by cutting the statutory number of working days in coal mines to 276 days per year from 330.

Following Glencore's deal, analysts at Investec said, "The Chinese decision to curb coal output was indeed a surprise – even to Glencore who in H1 2016 sold forward some of their production. Improved coal prices have been a welcome shot in the arm for both Chinese and international coal miners."

Glencore shares, which have been boosted in recent months by the improving coal outlook and broker opinions, were up 2.5% to 243.55p by 0900 BST on Tuesday.