Anglo American settles Apr-Jun coking coal at $330/mt FOB
Singapore (Platts)--4Mar2011/214 am EST/714 GMT
Anglo American has struck a deal with Japanese customers to sell coking
coal at a record $330/mt FOB Australia for the April-June 2011 quarter, 46.6%
higher than in the January-March quarter, market sources said Friday.
The deal comes at the same time as BHP Billiton is attempting to push
through an unpopular shift from quarterly to monthly pricing.
The transactions also mark a departure from the usual negotiation
procedure, as BHP normally leads and agrees the first "benchmark" deal.
Anglo American has reportedly reached contract agreements with both of
Japan's largest steelmakers, Nippon Steel and JFE Steel, though this could not
be confirmed directly. No official comment or confirmation could immediately
be obtained from Anglo American.
The headline price of $330/mt concerns Anglo American's flagship brand
German Creek, a well-known premium low-volatile hard coking coal.
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It is unclear how the company will be pricing its other coals, including
Moranbah North and Dawson.
The transaction is likely to be welcomed by the steel industry, which has
been universal in its rejection of BHP Billiton's proposed monthly pricing.
On the other hand, the deal commits the buyers to paying what is a
historical record price for a period of three months, while those taking up
BHP Billiton's offer are widely forecast to benefit from lower contract prices
in May and June.
The sources did not mention how the thorny issue of carryover tonnage
would be dealt with, following severe floods in Queensland.
On Thursday, BHP marketers for mines held by the BHP Billiton-Mitsubishi
Alliance venture made offers to Japanese steelmakers for its top-quality hard
coking coal to be sold at $300/mt FOB Australia for April sales, and at
$325/mt FOB for April-June sales, several market sources said.
The deal agreed closely matches latest spot metallurgical coal prices.
Platts assessed Peak Downs Region at $330/mt FOB Australia on Thursday,
while Premium Low Vol was assessed at $324/mt.
The price is 65% higher than in April-June 2010, when Anglo American
agreed to sell its coking coal at $200/mt FOB.
German Creek has 71% coke strength after reaction, 19.5% volatile matter,
11% total moisture, 9% ash, 0.54% sulfur, 0.064% phosphorous and 250 ddpm
Moranbah North has 65% CSR, 24.5% VM, 10% TM, 8.5% ash, 0.5% sulfur,
0.03% phosphorous and 1,700 ddpm fluidity.
Macquarie Commodities Research said Friday it would expect agreements
with other miners at this level to follow quickly.
The price level cited is higher than market expectations but comes as a
recovery in coal export volumes from flood-hit Queensland mines "has stalled
recently, helping to tighten market fundamentals," it said in a note.
Macquarie is expecting met coal export losses of 10.5 million mt from
Queensland over the first quarter and 16 million mt for 2011.
This situation will result in a degree of 'carryover tonnage' from
Australian suppliers that will be delivered at previously agreed lower prices,
resulting in realized prices "unlikely to match benchmark levels in the coming
The bank said that 6-7 million mt of undersupply over Q1 in the global
seaborne market would likely require "heavy" destocking at stockpiles at ports
For semi-soft and PCI coals, Macquarie expects record levels as Rio Tinto
and Xstrata were previously said to lock in settlements at 80% and 77.5% of
the benchmark premium hard coking coal settlement, it said.
Macquarie expects the new coking coal price to push up steel production
costs, with around a $70/mt quarter-on-quarter rise for pig iron, on the basis
of 0.5 mt of hard coking coal and 0.2 mt of coking coal used per ton of blast
"With coal and coke stocks throughout the supply chain remaining low,
there remains potential upside to our $260/mt FOB Australia Q3 settlement," it
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