BHP Steps Up Campaign against Annual Pricing of Coking Coal

Submitted by Jim Thesiger on 1 March, 2010 - 03:58

Mining giant BHP Billiton’s (BHP) campaign to come out of the annual coking coal pricing is picking up its pace as the coal indexes are being set up for the first time. In addition to this, Teck resources, the second largest exporter of the world is going to join the campaign against benchmark pricing. Data provider Platts is currently looking forward to reveal a daily cash price which is believed to be targeting a start-up during mid-March. On Friday, the US group Energy Publishing launched coking coal indexes which it termed as the first coking coal pricing indexes of the history.

According to Canada based Teck, it is backing BHP’s campaign in an attempt to push the Korean and Japanese buyers away from the annual price setting. Ron Vance, the senior vice-president of corporate development said, one of the main reasons for his side to support the campaign is that they believe the market can become quite lucrative over the next few years for the suppliers and therefore it is more logical to consider sorter-term pricing. BHP enhanced its campaign against the present coking coal pricing system after China unexpectedly transformed itself into a coking coal importer at spot prices from being an exporter last year. BHP is looking forward to establish a new index-based or quarterly pricing system from the negotiated benchmark system which determines annual price of coking coal. It is to be mentioned that change in the pricing of coking coal can boost the revenue that the Australian Bureau of Resources Economics is expecting from exporting coking coal during the current financial year.

BHP Billiton has allegedly offered quarterly contracts for coal at $US200 a tonne- something that is less than the present spot prices out of Queensland. The contract prices were $US129 per tonne during the previous year, down from $US300 a year earlier. According to an analyst, he understood that BHP has conveyed the message to the Japan based steel mills that they might get some volumes based on the annual pricing during this year which is going to be the last year for such deal.