BHP Billiton has agreed to cut coking coal prices for the 2009-10 contract year by about 60 per cent, analysts said.Citigroup said today that BHP, the world’s largest supplier of seaborne coking coal, has agreed to sell coking coal at $US115-$US125 a tonne to Japan’s Nippon Steel Corp.
Merrill Lynch said BHP appeared close to settling coking coal prices at $US129 tonne for its premium Peak Downs brand.
The potential benchmark deal - if confirmed - is a win for coal producers, after Japanese steel mills pushed for prices below $US100 a tonne, analysts said.
“Prices are above market expectations, even for metallurgical coal bulls. A good outcome for producers in a clearly bear steel market,” Merrill Lynch said in a note.
Last year, contract prices concluded at $US300 a tonne after huge floods in Australia’s Bowen basin shut down many mines.
BHP declined to confirm the news, and Nippon Steel couldn’t be reached due to a public holiday in Japan.
South Korean steelmaker Posco confirmed it has settled pulverised coal injection prices at $US90 a tonne with Australian suppliers, down 63 per cent on year.
“Prices of $US120 a tonne would give producers a healthy margin,” said Citi.
Japanese steel production in February plunged a record 44.2 per cent on year and confirmed the dire outlook from January, when output fell 38 per cent.
Annual contract talks for thermal coal benchmark prices were settled earlier this month at $US70-$US72 a tonne.
“The big unknown is volumes - both new contract tonnes and last year’s carry-over tonnes,” said ANZ commodity strategist Mark Pervan.
During the 2007-08 financial year, commodity exports accounted for over 46 per cent of Australia goods and services balance.
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