Japan Major Steel, BMA Settle Coking Coal Quarter Price

Japanese major steel makers including Nippon Steel and JFE Steel agreed with world coking coal supplier, BHP Billiton Mitsubishi Alliance (BMA) of Australia to increase hard coking coal price by 12.5% in July-September from April-June. The price is 74% higher than annual contract price in fiscal 2009 ended March 2010. The steel makers will settle the price with other miners. Their raw materials cost will increase more in July-September when iron ore price is expected to increase in July while they will negotiate with miners for soft coking coal and pulverized coal injection (PCI) coal.

The hard coking coal price is FOB US$ 225 per tonne for premium hard coking coal in July-September, which is US$ 25 higher than April-June level. With jump in April-June, the price is US$ 96 higher than annual contract price in fiscal 2009.

Coking coal spot price to China is FOB US$ 230-240 per tonne level recently compared with the recent peak as high as US$ 270 in spring under supply trouble including coal chain impact by Australian heavy rain. The supply is still tight due to growing demand for China and India. Japanese major steel makers had no choice but to accept the higher offer by BMA. The steel makers will settle the price negotiation with other miners as BMA for hard coking coal.

Japanese steel makers start price negotiation for soft coking coal and PCI coal in the week. Japanese steel makers see supply of soft coking coal and PCI coal is not tight as hard coking coal and thermal coal spot market decreases recently while their April-June purchase price is relative higher for soft coking coal and PCI coal in comparison with hard coking grade despite of the quality gap. However, Japanese steel makers are still cautious for potential price increase for soft coking and PCI coal.

Japanese steel makers see their cost for iron ore and coal increased by 15,000 yen per tonne in April-June from fiscal 2009 level. Iron ore spot market price decreases recently from the peak in earlier the year but the price is still higher than Japanese steel makers’ purchase price in April-June. Japanese steel makers’ iron ore purchase price would increase in July from April-June under the new pricing system to reflect spot market.