large trades after market, page-5

FYI from a Citi daily report

CK

Coal
Coking Coal Settles at US$120/t
Alan Heap
+61-2-8225-4853
[email protected]
ƒæ Settlement in Line ¡X We believe JFY09 coking coal prices have been settled at
US$115-125/t (quality dependent) between Nippon Steel and BMA. This is in line
with our forecasts of US$120/t.
ƒæ No Carry Over ¡X We believe this settlement contains no carry-over tonnes, a much
discussed sticking point of the negotiations. Rio Tinto dropped its coking coal
prices to India's JSW from US$305/t to US$175/t for January-March 2009
shipments and there was a risk that settlement of pricing for carry-over tonnes
could obscure the actual price settlements for 2009/10. This now appears not the
case.
ƒæ Producers Win ¡X We understand Japanese steel mills were pushing for prices
below US$100/t, while producers were suggesting prices in line with recent spot
sales of US$140/t. Prices of US$120/t would give producers a healthy margin.
Coking coal median costs could fall ~20% to US$40/t this year as lower mining
costs and exchange rates impact.
ƒæ PCI Some Settlements ¡X POSCO recently settled JFY09 PCI prices at US$90/t with
some Australian suppliers. This is above Citi's PCI forecasts of US$82/t. We
believe Japanese consumers of PCI are still pushing for prices of ~US$80/t.
ƒæ Beyond the Settlement ¡X Coking coal remains an attractive industry long-term
perspective. Infrastructure constraints will likely impact again 2011. Additional
supply sources are capital intensive and some time away. High quality coking
coal is a rare geological commodity.