January 10, 2006 THE first coal price agreements between small Australian miners and Japanese steel makers this year have seen prices fall 31 per cent, according to Japanese reports.
Analysts have predicted Australian producers will have the upper hand in iron ore negotiations with the mills this year, and most have forecast a 10 to 15 per cent increase on top of last year's 71.5 per cent price rise.
But contract prices for coking coal, also used in steel production, have been tipped to fall after they rose 120 per cent last year.
The unofficial mouthpiece of the Japanese Steel industry, the TEX Report, today said some small Australian miners had signed deals to sell semi-soft coking coal to the Japanese for $US53 per tonne, down 31 per cent from last year's price.
But the report said it was premature to think this would mark out the trend for other negotiations because agreements had not yet been reached with major suppliers like Rio Tinto (rio.ASX:Quote,News) and Xstrata Coal.
UBS mining analysts said if these prices were indicative of the way negotiations were going it could affect local coal stocks.
"If they were to translate through to benchmark settlements between the major coal producers and the steel mills it would be a negative outcome for the market as the prices being talked about are below our estimates and, we believe, market consensus," UBS said in a client note.
UBS had been forecasting a drop of between 10 and 15 per cent with market consensus believed to be around a 20 per cent decline.
The earnings per share of some coal miners could be affected if the prices dropped by 30 per cent, UBS analysts said, with stocks like Macarthur Coal and Excel Coal potentially the worst affected.
At 1257 AEDT Macarthur Coal (mcc.ASX:Quote,News) was down 32c or 6.5 per cent to $4.61 while Excel Coal (exl.ASX:Quote,News) was down 1c to $6.27.
