PSU steelmakers agree to monthly price setting of coal by BHP Billiton

The largest global metallurgical coal supplier BHP Billiton has pressured public sector steel makers into accepting monthly price revision for at least 50 per cent of the imported figure.

BHP, which supplies around 60 per cent of coking coal required by SAIL and RINL, insisted on a complete changeover to monthly revisions instead of quarterly revisions, but finally relented to a compromise formula thrashed out last week.

Ahead of its benchmark price deal with the Japanese steel mills, at a meeting with SAIL and RINL on June 15 and 16, the Australian prime hard coking coal exporter dictated its latest terms. Coking coal imports for SAIL and RINL is negotiated by an eight-member empowered joint committee (EJC). The new stance of BHP is significant as private sector steel makers, such as Tata Steel, JSW and Jindal Steel and Power Ltd, also generally follow the terms worked out by the suppliers and public sector importers.

Monthly, quarterly prices

Mr T.K. Chand, Director (Commercial) of RINL, who is also on the EJC, told

Business Line that from July-September quarter BHP would supply metallurgical coal under both quarterly and monthly price terms. The exact price for hard, medium and soft coking coal would, however, be finalised after the Japanese deal is through by the end of this month.

Indian steel makers broadly take the coking coal price reference from the deal struck by their Japanese counterparts.

Anglo American, the other major Australian coal supplier to local steel mills, however, will stick to the quarterly price revision.

At the EJC meeting in New Delhi it became apparent that the suppliers wanted to hold the price line in the context of marginal drop in demand from Japan as aftermath of earthquake and tsunami as also from China owing to an economic soft landing going forward.

“Anglo American and other US and New Zealand suppliers – L&K, Alpha and Solid Energy – were a little more appreciative of needs of bulk Indian metallurgical coal importers,” Mr Chand said.

SAIL imports a total of around 17 million tonnes of coking coal a year, while RINL imports 6 million tonnes a year. All Indian steel majors are import-dependent and have very little bargaining power.

Coking coal supplies and prices globally have severely been affected since floods in Queensland early this year. The on-going mineworkers' agitation in BHP's six Queensland mines has queered the pitch further.