- Bumper coking coal price agreed for March quarter
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The benchmark contract price for coking coal agreed by Glencore and Nippon Steel for the first quarter of 2017 is the highest since 2011. Jason South
by
Peter Ker
Coking coal miners will be paid 42.5 per cent more for their product in the New Year, after the benchmark contract price for the first quarter of 2017 was settled at the highest price since 2011.
Steelmakers and miners were keen to agree before Christmas on a price for the period between January 1 and March 31, and they have agreed that premium hard coking coal sold under the contract will be priced at $US285 per tonne during the period.
The price was agreed by Glencore (which produces coking coal at the Newlands and Oaky Creek mines in Queensland) and Nippon Steel earlier this week, and matches the price set in the December quarter of 2011.
Miners working under the contract have been receiving $US200 per tonne for their coal since October 1, and they were receiving just $US81 per tonne under the contract price as recently as the first quarter of 2016.
Prices for both coking and thermal coal
have rallied strongly since the start of 2016, after China ordered its coal mines to produce less as part of efforts to reform the sector.
Those production cuts
combined with supply interruptions in Australia to ensure tight supply for coking coal in particular between June and November.
IHS Markit analyst Marian Hookham said the price agreed by Glencore and Nippon Steel was being adopted by rival miners.
"Importantly, the new quarterly contract is being followed by other producers, including overnight by Canadian producer Teck Resources," she said.
The highest quarterly contract price ever agreed was in the June quarter of 2011, when miners were paid $US330 for each tonne of coking coal amid supply shortages caused by floods in Queensland.
Glencore and Anglo American both sell their Queensland coking coal under the traditional quarterly contract system, but some like BHP Billiton and Mitsubishi prefer to sell their product at the daily market or "spot" price.
The spot price rallied from $US75 per tonne in February to $US308.80 per tonne in November, by which time BHP was making profit margins of more than $US230 on each tonne of coal sold.
But the spot price appears to have peaked, having slipped in recent days to be $US274.40 per tonne on Tuesday.
The near-term trajectory of the spot price will likely depend on whether the cyclone season in Queensland causes any disruptions to supply.
The extraordinary rally in coal prices this year has boosted the mining sector's contribution to state and federal budgets,
with the Queensland Government revealing on Tuesday that the coal surge will deliver about $US1.4 billion to the state's coffers this year and $2.1 billion over the next four years.
The federal government is expected to publish its "mid-year economic and fiscal outlook" statement next week.
The coking coal contract price traditionally serves as a reference for other types of coal, and so a price agreement usually triggers similar agreements for semi-soft coking coal and pulverised coal injection (PCI) coal.
Those types of coal typically fetch lower prices than hard coking coal, and Ms Hookham said PCI producers were seeking a price around $US190 per tonne for the March quarter, up from $US133 per tonne in the December quarter
SF
