BHP says 2009 steel-making coal prices fall 58 pct

Posted on 10 June 2009

Source: Reuters, June 10, 2009

Global miner BHP Billiton has agreed to take a 58 percent price cut for the coal it sells to major steel-makers, in line with market expectations and a sharp downturn in the global steel industry.


"We had assumed 60 percent (decline)," said Sydney-based Patersons Securities coal analyst Andrew Harrington.


BHP said in a brief statement on Wednesday that, based on settlements so far with key customers, U.S.-dollar prices for coal delivered on a free-on-board basis would fall by about 58 percent in the current shipping year from the 2008 shipping year.


Global steel output fell 23 percent in the first two months of 2009 from a year earlier, according to the World Steel Association.


In March, BHP Billiton Mitsubishi Alliance (BMA), the world's top coking coal exporter, agreed to accept a discount of around 60 percent from Japan's Nippon Steel.


That deal all but established the 2009 benchmark price and also signalled a looming price cut in the other main steel-making ingredient, iron ore.


Iron ore prices have since dropped 33 percent for Nippon Steel, JFE Holdings and POSCO.


The 58 percent fall in price, based on metallurgical coal produced at BMA's Goonyella mine in the Australian state of Queensland, equates to a new benchmark of $128 per tonne, down from $300 a tonne, Patersons' Harrington said.


Australian investment bank Macquarie said in a research report on Wednesday that it expected steel-making coal prices to rebound 9 percent next year as Chinese demand ramps up.


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