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Peabody, Posco settle Apr-Jun PCI at $141/mt FOB Australia, up $18/mt from Jan-Mar

Singapore (Platts)--20 Mar 2013 410 am EDT/810 GMT


Coal miner Peabody and South Korean steelmaker Posco have signed a quarterly contract for low-volatile PCI coal for April-June 2013 at $141/mt FOB Australia, up $18/mt or 14.5% from the first quarter, buyer and seller sources in Asia and Australia said Wednesday.

The deal at $141/mt FOB applies to Q2 loadings of Peabody's flagship low-vol PCI brand Coppabella, which had been sold at $124/mt in Q1.

Mid-vol PCI Century, meanwhile, was said to have been settled at $130/mt FOB, though this could not be confirmed.

Being between a major producer and consumer, the new settlement seems likely to be considered a global benchmark for Q2.

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Coppabella is considered a high-quality PCI brand globally, with around 13% VM, 8.5% ash and 80 Hardgrove Grindability Index.

The deal could place PCI at 80% of premium HCC or above given widespread speculation in the market of a premium HCC settlement for Q2 at $172/mt FOB.

While PCI has achieved this level in the past, it is higher for Q2 compared to the last seven quarters, when it was about 72-75%.

The narrowing of the spread between PCI and HCC prices reflects "supply shortfalls and low margins for existing premium Low-vol PCI suppliers from Queensland and Canada," a major PCI producer said Wednesday.

Another large PCI producer was surprised by the deal, seeing it as higher than expected.

"That's a huge price. I'm surprised they agreed," he said, citing the ongoing "correction" in Chinese spot import prices.

Spot low-vol PCI prices in China have fallen by close to 7% in the last six weeks, and were assessed Wednesday at $150/mt CFR China, or $134.50/mt FOB Australia, $6.50/mt below the new settlement.

Peabody Energy could not be reached for comment, while a Seoul-based Posco spokeswoman refused to confirm or comment on prices.

--Julien Hall, julien_hall@platts.com

--Edwin Yeo, edwin_yeo@platts.com

--Edited by James Leech, james_leech@platts.com





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