Nippon Steel, JFE Steel Agree with BMA to Cut Coking Coal Price by 7%

Nippon Steel and JFE Steel agreed with world largest coking coal supplier, BHP Billiton Mitsubishi Alliance (BMA) of Australia to reduce premium hard coking coal purchase price in October-December by 7% from July-September by Tuesday. Sumitomo Metal Industries and Kobe Steel also agree with BMA as such. The quarterly price decreased for the first time since the price setting entered into quarterly basis since April. However, the price is 62% higher than annual price in fiscal 2009 ended March 2010 and 4.5% higher than April-June quarterly price under tight supply. Japanese integrated steel makers will set the coking coal price with other miners while the makers will start negotiation with miners for quarterly price for semi hard coking coal and coal for pulverized coal injection.

The new quarterly price is FOB US$ 209 per tonne for premium hard coking coal for October-December, which is US$ 16 lower than July-September level. While the price down depends on the coal quality, the steel makers apparently agreed with BMA to reduce the price by around 7-8%.

The steel makers expected less than US$ 200 per tonne of quarterly price in October-December when coking coal supply gets more stable than before and some spot price decreased to less than US$ 200. However, the price down was smaller than expected when BMA pushed the high level price citing more than US$ 200 of purchase prices by Chinese and Indian buyers under tight supply.

The steel makers start price negotiation for October-December for semi hard coking coal and PCI coal, which was US$ 172 per tonne and US$ 180 respectively in July-September. The semi hard coking coal and PCI coal price is expected to decrease wider than hard coking coal when the supply is not tight as hard coking coal and steel makers prefer hard coking coal to stabilize the blast furnace operations.

Iron ore quarterly price is expected to decrease just more than 10% in October-December from July-September while the price depends on coming negotiation. Integrated steel makers’ cost could be much higher for October-December than a year earlier level when iron ore quarterly price is likely to be higher than April-June level as hard coking coal.