Posco agrees to a tripling in coal prices to a record
mining-journal.com
Posco, Asia`s third-biggest steelmaker, agreed to a tripling in the benchmark contract price for coal, setting a record for the steelmaking material after floods in Australia reduced global supplies.
The Pohang, South Korea-based company will pay Australian suppliers between 205% and 215% more for some of its coking coal for the year starting April 1, Ko Min Jin, a spokeswoman, said by telephone.
The settlement indicates the price may have jumped to as much as US$308.70/t, according to Bloomberg calculations. The bigger-than expected increase, on top of record iron ore prices, will force Posco and other steelmakers to raise prices or suffer declines in profit.
The floods forced at least six producers including BHP Billiton to warn of missed deliveries from the world`s largest exporter of the fuel. "The steel mills are going to have to bite the bullet," Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group, said by telephone in Melbourne.
"The coking-coal market has been heavily impacted by supply issues."
Posco`s share price fell 2,000 won, or 0.4%, to 515,000 won in Seoul trading on April 7, underperforming a 0.4% advance in the benchmark Kospi Stock Index. Nippon Steel Corp, the world`s second-largest steelmaker, fell 3.4% to 512 yen in Tokyo.
BHPB rose 5% to A$40.55 in Sydney.
"The coal price increases are actually higher than we expected," Kim Gyung Jung, an analyst with Samsung Securities Co, said in Seoul.
BHPB last year sold its premium coking coal products at US$98/t. Goldman Sachs JBWere Pty on April 4 said prices would rise to US$290/t.
Posco needs to raise prices of its benchmark hot-rolled coil by 120,000 won (US$123/t), or 20%, to cover the higher coal and iron ore costs, James Ha, an analyst with Eugene Investment & Securities Co in Seoul, said April 7 in a note to investors.
Iron ore prices jumped as much as 71% for the 12 months starting April as demand from Chinese steelmakers outpaced global supplies.
Emma Meade, a spokeswoman for BHPB, declined to comment. Alison Smith, a Brisbane-based spokeswoman for Rio Tinto, declined to comment. Xstrata plc`s Sydney-based spokesman James Rickards could not immediately be reached for comment.
Calls to Haroon Hassan, a spokesman for Luxembourg-based ArcelorMittal, the world`s biggest steelmaker, weren`t immediately returned.
"The agreed prices will be applied retroactive to April 1," Posco`s Ko said, declining to name the suppliers and give the agreed prices. Posco hasn`t settled prices for all of its contracts, she said.
Posco sources 53% of its coal from Australia and the rest from Canada, China, the US and other countries, according to a March 17 report by UBS AG.
(Bloomberg, April 7) |
