metallurgical coal price negotiations update, page-9

Lloyd's List Daily Commercial News 09 April 2008


BHP's coal contract price higher than expected


BHP Billiton Mitsubishi Alliance has agreed to increase its hard coking coal contract price with ArcelorMittal by 211% for the financial year 2008-2009, Lloyd's List in London reports today (Wednesday, April 9).

The mining giant is understood to have settled at US$305 per tonne. ABN Amro Equities Australia said in a research note that the contract price was much higher than its estimate of US$220 per tonne.

It added that the rise should boost BHP Billiton's forecast earnings for the financial year 2009-2010 by about 9% – when combined with its estimates for other related benchmark prices.

Earlier this week, Posco agreed to pay Australian shippers between 205%-215% more for coking coal for the financial year from April 1.

“BHP does not comment on individual coal settlements but, in our view, this obviously sets the backdrop for the planned negotiations with the Japanese early this week,” ABN Amro said in its research note.

It added that BMA, Australia's largest coal miner and exporter, was now seeking US$300 per tonne fob from Japanese steel mills.

That would represent a contract price increase of over 210% from the previous year's $98 per tonne.

“We believe a positive for the Asian consumers is that the settlement is less than the US$350 per tonne being floated by Xstrata, while the negative is that it is significantly higher than the US$220 per tonne provisional pricing of Canadian hard coking coal,” said ABN Amro.

Spot cargoes of coking coal have been sold recently at prices as high as US$330 per tonne.

The Australian Bureau of Agricultural and Resource Economics recently forecast that the value of coking coal exports in the 2008-2009 financial year would double to US$22.2bn.


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