Coal news and updates

Anglo American has settled January-March 2014 coking coal deals with Asian steelmakers at $143/mt FOB Australia, down $9/mt from the fourth quarter of 2013, market sources said Thursday.

 

The price applies to the miner's flagship premium low-vol hard coking coal brand German Creek, and is down from $152/mt FOB in Q4 2013. Premium mid-vol Moranbah North had been settled at $139/mt, three sources with knowledge of the matter said. PCI coal was yet to be set, sources said.

 

The new quarterly price is the lowest since the annual price set for April 2009-March 2010, and coincides with the almost continuous decline in spot prices since late September.

 

Nonetheless, the price remains substantially higher than the latest spot prices. Platts assessed premium low-vol coking coal at $134/mt FOB Australia Wednesday.

 

"This settlement is weak relative to general market expectations; however, it is a fair result given where spot is currently trading," said Colin Hamilton, head of global commodities research for Macquarie Group.

 

Neither buyers nor sellers expressed much enthusiasm about the deal, with miners pointing out this was the lowest level in some time and mills lamenting the gap with spot prices.

 

"It's a terrible outcome for everyone," a miner said.

 

"A price of $143/mt is higher than the prevailing spot price," a procurement manager at an Asian mill said. He predicted that oversupply would continue to drive prices lower and he expected prices to drop below $140/mt FOB next year. He added that metallurgical coal prices now depended on China.

 

"Given the backdrop of over 10% growth in seaborne supply this year plus Chinese domestic output growth, next year looks like another market share battle for met coal, and this settlement sets the backdrop for another tough year for miners," Hamilton said.

 

A European steelmaker said northern European flat steel prices have declined less than coking coal in recent months, which he said was "absolutely positive" for mills.

 

Pricing mechanisms for Australian miners into Europe are mixed, with some suppliers offering only monthly-priced contracts and others pricing quarterly.

 

Earlier this month, BHP Billiton-Mitsubishi Alliance (BMA) offered January pricing at $143/mt FOB, a price which has been accepted by some steelmakers.

 

It is unusual for Anglo American to lead the quarterly negotiations. BMA is the one to lead usually, but negotiations between BMA and Nippon Steel & Sumitomo Metal were said to have broken down this time.

 

The downtrend in met coal prices contrasts with the other main steelmaking raw material, iron ore, which has been range-bound between $130-145/mt CFR China for the last five month. Physical iron ore prices are typically set against Platts spot assessment for 62%-Fe material.

 

"The difference between met coal and iron ore is stock levels in China -- latest data shows met coal stocks at Chinese mills are the highest seen this year, while iron ore stocks remain below normal," Hamilton said.

 

A Brisbane-based spokeswoman for Anglo American could not be reached for immediate comment.

 

 

 

Source: Platts