Coal

[mhlld]

BHP secures premium coal price from Japan
By Barry FitzGerald
Resources Editor
December 14, 2004


Coking coal market leader BHP Billiton has extracted a boom-time price settlement for exports of its premium brands to Japanese steel makers in 2005-06, but does not intend confirming the deal until the new year.

The price increase, from $US57.50 a tonne to a record $US125 a tonne, was nevertheless taken as given by the sharemarket yesterday, where BHP and the other listed producers of the key steel making raw material all made solid gains.

BHP is not expected to confirm the price rises - it represents a gain of 117 per cent - until it has reached settlement on the majority of its contracts and a majority of coal brands. That was the same position it took last year when confirmation of a 23 per cent increase in the 2004-05 coking coal price came a long time after the first settlements were made.

Negotiations on other brands of coal - semi-soft coking coal and PCI coal - continue in Japan this week. Big price increases are also expected, but not to the same extent as the premium end of the coking coal market.

Broker Goldman Sachs JBWere has forecast a 100 per cent increase in semi-soft coking prices, to from $US42.50 a tonne to $US85 a tonne in 2005-06. The broker is also forecasting that Australia's iron ore producers will extract a 30 per cent price increase for shipments in 2005-06. But, while iron ore prices are forecast to hold up the year after, coking coal is expected to weaken as the market absorbs new supplies from Australia and Canada.

Australia exports about 125 million tonnes of coking coal annually. Japan is the key market, but the surge in demand from steel makers in China, India and Brazil has delivered new pricing power to the coking coal producers. The big local coking coal exporters include BHP, Rio Tinto, Xstrata (MIM), Excel Coal, Anglo American and Wesfarmers.

The locally listed posted solid share price gains yesterday. BHP was up 18¢ to $14.86, Rio gained 16¢ to $38.60, Wesfarmers added 56¢ to $36.98 and Excel was 16¢ higher at $4.73.

The one weak spot was NSW's Austral Coal. The market sent the coal producer's shares 11¢ lower to 58¢ yesterday as it warned of heavy losses at its Tahmoor North mine because of equipment failures and geotechnical issues in mining the coal seam.

http://www.theage.com.au/articles/2004/12/13/1102787015414.html?oneclick=true#