European steel mills warned to expect higher Q1 coking coal price

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

19 Nov 2010

European steelmakers may have to brace for higher coking coal prices next quarter, according to comments by an Australia-based producer to regional buyers ahead of formal negotiations An industry event in Hong Kong this week will see the official start of negotiations between the biggest supplier, BHP Billiton-Mitsubishi Alliance, and Japanese steel mills, which are the largest importers.
Current spot hard coking coal prices in Asia show transactions are being done higher than the $209/mt benchmark settled for the fourth quarter period, threatening to raise costs for mills in Europe that have suffered declining spot prices for hot-rolled coil and plate since September.
"We have communicated the expectation [of prices increase for Q1 2011] on our part, although we haven't quantified it," said the producer source.
Credit Suisse's expectations of a $15/mt increase next quarter in benchmark prices for premium grades such as BMA's Peak Downs coal "could be" what is finally agreed, he commented.
Macquarie Commodities Research expects further increases in coking coal prices to $250/mt by mid year while recent rain in Queensland was pushing up short-term upside for prices into Q1, said an analyst at the Australian bank.
Both banks also expect increases in benchmark iron ore contracts next quarter, as Platts assessments show landed prices in China headed back towards record levels hit in April.
Platts daily Peak Downs Region coking coal price assessment has averaged $221.35/mt since launch on August 23 and $228.41/mt so far in November.
The coal supplier said European mills are well covered for coal and, barring stronger performances from producers in Germany, regional steel output and demand was "fair, but not great."
The marketers at BHP Billiton, who take charge of sales from the Queensland-based mines held in a joint venture with Japanese trader Mitsubishi Corp, are said to be pushing for the adoption of monthly-based pricing starting next year after successfully moving contracts away from annual benchmarks to pricing fixed on a quarterly basis from April.
The source said his company would be open to following BMA with shorter-term monthly and index-linked pricing although the lack of liquidity was a concern in computing market levels, as well as pricing deliveries on a shorter-term basis than one a month.

Source: Platts