A dramatic surge in the spot price of Australia's second-biggest
export, coking coal, has seen Japanese steel mills delay new contract
settlements that would deliver big gains to Australian miners, in a
standoff over an expected doubling of the contract price that could
spell the end of the current pricing system, The Australian reported.
Australian coking coal spot prices have surged 155% since the start of
June to a four-year high of $213/t as China cracked down on mining
overcapacity at the same time that government stimulus fired the
housing market, while rain and derailments hit Australian supply.
The price is now more than double the still-standing September quarter
contract price of $92.50/t, with the size of the ¬potential jump in
the new ¬contract price delaying settlement more than a week into the
While BHP Billiton, the world's biggest coking coal shipper, has moved
almost completely to spot pricing and is reaping the benefits of the
surge, other ¬Australian miners are still receiving a contract price
less than half that of current spot prices as they wait for price
Japanese steel mills are delaying settling the current quarter's
price, which is normally set at close to the spot price at the start
of the quarter, as they hold out for a hoped-for fall in spot -prices.
The surge in coking coal prices looks like being the major driver in a
wiping out of Australia's monthly trade deficits for the first time in
more than two years.
Price negotiations between Japanese steel mills and Australian miners
continued on October 7 in Sydney at the 33rd Japan-Australia Coal
Conference, a closed meeting of coalminers and users that occurs every
Whitehaven Coal managing director Paul Flynn, who was this JACC
meeting's co-chairman, said it was too early to say where contract
prices would settle.
Whitehaven, which produces both coking coal used in steelmaking and
the thermal coal burned by power stations, is ¬exposed to the
quarterly coking price settlements but is not participating in the
According to Macquarie commodities analysts, Nippon Steel is demanding
December quarter contract prices of $160/t.
But miner Anglo American wants $212/t, which would be in line with the
regular practice of settling at spot prices at the start of the
The price of Australian PCI coal, a lower-grade steelmaking ingredient
whose spot prices have not risen as much as premium coking coal,
settled last week at $133/t, in line with the spot price.http://www.sxcoal.com/news/info?id=4547901&lang=en
Peabody deal at $200/mt said to break Q4 coking coal impasse
A benchmark coking coal accord at the upper end of expectations
appears to be getting established, as Peabody Energy has sold North
Goonyella premium mid-vol at $200/mt FOB Australia under contract for
the fourth quarter to Nippon Steel, according to a source close to the
The source described the sale as a benchmark deal, but this could not
immediately be confirmed.
The Q3 benchmark was $92.50/mt FOB, and spot prices rose after key
spot buyer China increased purchases, supply was disrupted in
Australia and China, and mining curbs were imposed in China, along
with limited exports from the US at a time of greater global spot
trade exposure. Steelmakers were left stunned at the prospect of
$200/mt benchmark, given tight availability of alternative coals, with
one Atlantic buyer suggesting the likely outcome would be lower steel
production in due course. European and Brazilian steel mills have
bought some coals ahead to cover the year at potentially lower prices,
reducing the exposure to the quarterly benchmark while also increasing
spot and index-linked purchasing.
Talk of the settlement by US miner Peabody, which has US operations
under Chapter 11 and mines met coal in Australia, surfaced Monday from
the US, a public holiday in Japan. St Louis-based Peabody declined to
comment on the matter. Nippon Steel & Sumitomo Metal Corp. was not
available for comment when contacted outside usual office hours.
The two-day Australia Japan Coal Conference ended Friday afternoon,
with no news of a settlement emerging that day. The AJCC draws senior
steel and coal executives, promoting cordial discussion around
longer-term planning and industry challenges, more so than finalizing
Analyst Lucas Pipes of investment bank FBR, citing a report of a
"potential settlement," described it as "well above our and others'
expectations even over the weekend of around $180-$190/mt."
Anglo American and Glencore have previously set the hard coking coal
benchmark in their sales negotiations with Asian steelmakers, leading
some buyers to question the validity of the Peabody arrangement, ahead
A source close to the price talks said Nippon Steel was getting closer
to meeting bids after an opening negotiation position last month said
to have been $150/mt FOB.
"At the AJCC, Nippon became a lot more sensible about pricing, edging
closer to a deal. If someone moved down to $190 they would have got a
As key miners were seeking to get higher prices in line with spot
prices, and keeping up offers last heard at $212/mt FOB in light of
Chinese buying interest and a force majeure declared at Anglo's German
Creek mine, Peabody may have taken the initiative. Peabody already
settled PCI for Q4 at $133/mt FOB with a separate mill.
The usual 80% ratio for PCI to HCC would have yielded a HCC price of
around $160/mt, suggested a buyer, who was surprised at a $200/mt
level potentially agreed. A $200/mt outcome for HCC would lead PCI to
a 66.5% ratio, compared to the current spot price ratio at 61%.
The news came after the price settlement was delayed into a second
week, after the usual calendar deadline of the end of the prior
quarter in question.
"A settlement of $200/mt would be the highest in US dollars since the
Q3 2012 contract of $225/mt," FBR said. "In AUD, the settlement would
imply a price of A$263/mt, the highest since Q4 2011 when the contract
settled at A$274/mt and the Australian dollar was trading at $1.04/mt
vs. $0.76 today."
North Goonyella had a longwall move expected to last till
end-September. It is a mid-vol with high fluidity. On the globalCOAL
brokered screen trading platform, North Goonyella makes up one of five
brands traded on the premium mid-vol contract, along with BHP Billiton
Mitsubishi Alliance's Goonyella, Glencore's Oaky Creek, South32's
Illawarra, and Anglo American's Moranbah North.http://www.platts.com/latest-news/metals/london/peabody-deal-at-200mt-said-to-break-q4-coking-21741895