Japan demands 2007 coking coal prices at annual talks

Kalimantan Coal

Article from: Dow Jones Newswires
JAPANESE steel mills will demand a return to 2007 contract prices for coking coal when annual talks resume this week.
The steel mill operators will demand prices return to $US98 a metric ton at talks with Australian and Canadian marketing managers, Macquarie Bank said in a report released over the weekend. Last year, when benchmark prices tripled because of devastating floods in Australia’s Bowen Basin in Queensland, the world’s largest producing region of coking coal, the contract settlement was $US300 per ton. With global steel prices down 40 per cent, Japanese mills are demanding a much lower price, but coal producers cite higher costs and recent spot price sales into China to support contract price aspirations at more than $US130 per ton, Macquarie said. The bank forecasts a 2009 benchmark of $US110 per ton. Recent sales into China concluded at between $US130-$US150 per ton, with Chinese domestic prices at $US150-$US160 per ton. These unusually high Chinese domestic prices are drawing imports from the weak seaborne market, but the bank expects support for prices to be limited. “Given the weakness in global demand and our view that the coking coal market will remain comfortably supplied, we would expect contract prices to have to trade down to levels that put high-cost producers under threat of closure,” Macquarie said, referring to US and Canadian producers such as Western Canadian Coal Corp. BHP Billiton is the world’s largest supplier of seaborne coking coal through its 50-50 joint venture with Mitsubishi Corp, the BHP Billiton Mitsubishi Alliance.

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