Japan Steels, BMA Agree to Cut Coking Coal Price by 57% for F2009

Nippon Steel, JFE Steel and major Japanese steel makers agreed last week with BHP Billiton Mitsubishi Alliance (BMA) to reduce hard coking coal price by 57% for fiscal 2009 shipment starting April. The price decreases for the first time in 2 years. The steel makers will settle the price with other suppliers. The makers are expected to settle semi-coking coal and pulverized coal injection coal with major price down through negotiation with major suppliers. However, the makers would keep using high priced coal for 3 months or more from April due to carryover.

The price decreases to FOB US$ 128-129 per tonne for top grade hard coking coal while the price tripled to US$ 300 for fiscal 2008 under very tight supply. The steel makers sought to reduce the price to fiscal 2007 level at the negotiation while the supplier resisted the wide hike citing more than US$ 145 of spot purchase price. Japanese steel makers accepted the higher price at the talk last week while they expected US$ 125 or lower price in the mind.

The steel makers will settle the negotiation with other coal suppliers including Teck Cominco, Rio Tinto and Anglo American in line with the settlement with the world largest coking coal supplier, BMA. The steel makers expect annual contract price should decrease significantly for semi-coking coal and PCI coal when the price is in range between high quality hard coking coal and thermal coal.

However, the steel makers keep using coking coal with fiscal 2008 price for months when their consumption decreases under major production cut. They could take more than 3 months to enjoy the lower price when the production cut could take longer time to consume the coal inventory.