Anglo tips price spike for coal as rains hit output EXCLUSIVE: Matt Chambers From: The Australian February 10, 2010 12:00AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these? MINING giant Anglo American says weeks of heavy rain have slashed up to 10 million tonnes off Queensland's valuable coking coal output, exacerbating an expected global shortage and setting the stage for a big increase in this year's contract prices.
The miner is also taking its first step into annual coking coal price negotiations to resist a push by BHP Billiton, the traditional price setter, to replace annual benchmark contracts with shorter-term pricing.
Anglo American Metallurgical Coal chief Seamus French said a combination of summer rain, unexpected Chinese imports and increases in global steel output might leave the coking coal market tighter than it was in 2008, when heavy demand and crimped supply sent annual prices rocketing from $US100 a tonne to a record $US300.
"We did all our analysis in November and December, before the rains, and even then we thought this year would be a tight, 2008 scenario," Mr French told The Australian. "Then the rains happened.
Start of sidebar. Skip to end of sidebar. Related Coverage Xstrata's hope for coal Courier Mail, 8 days ago Coking coal top pick The Australian, 23 Dec 2009 Anglo to double coal output The Australian, 24 Sep 2009 China won't become net coal exporter The Australian, 18 Sep 2009 BHP appeals for index pricing The Australian, 16 Sep 2009 End of sidebar. Return to start of sidebar. "Our estimate would be probably 5 to 10 million tonnes have been lost in the year to date (in Queensland) and we're only into the second week of February."
Rains in January and February have closed mines in Queensland, caused temporary shutdowns of major ports and crimped rail access from mines to port.
A combination of flooding of mines and strong steel demand was responsible for the huge 2008 price gains.
Anglo had expected a similar rise this year without the rain, because of increased global steel production and China closing down smaller mines for safety and environmental reasons.
China's usual coking coal imports of 5 million tonnes shot up to 34.4 million tonnes last year and are forecast to stay at similar levels in coming years.
Queensland is the world's biggest exporter of coking coal, which is used to make steel and is better quality than the thermal coal used in power stations.
The state produces about 110 million tonnes of coking coal a year, or about half of global seaborne volumes.
BHP, by far the world's biggest coking coal exporter, can produce 60 million tonnes a year from Queensland, while Anglo can do about 20 million.
Brisbane-based Mr French would not say whether he expected contract prices, which slumped to $US125 a tonne this year, to return to $US300.
"I'd hate to put a number on it, but all the fundamentals for record prices are there, and are probably even stronger this year because of Chinese demand," he said.
"We certainly expect a healthy price outlook this year."
Spot prices have reportedly reached as high as $US220 recently, which is still well below the $US350 reached in early 2008. There have also been reports BHP is prepared to settle at $US200 a tonne.
Mr French said a BHP push for quarterly, or half-yearly, contracts from existing buyers meant Anglo and other miners were playing an active part in price talks for the first time.
"The traditional mechanism has been thrown up in the air," he said. "BHP has chosen to offer a suite of options, where customers can't get pure annual pricing and volume.
"However, customers have told us they want an annual pricing option and Anglo plans to offer this option
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