Peabody, Nippon agree 116 pct rise in Q4 metallurgical coal price (updated)

Nippon Koshuha Steel Co

12/10/2016 06:02

* Peabody, Nippon set Q4 metallurgical coal benchmark 
    * Price more than doubles from Q3 to $200/T 
    * Increase follows spot price gains 
 
 (Adds quotes, details) 
    By James Regan 
    SYDNEY, Oct 12 (Reuters) - Peabody Energy Corp  BTUUQ.PK  
and Nippon Steel  5401.T  have set the fourth quarter 
metallurgical coal contract benchmark at $200 a tonne, more than 
twice the price in the previous quarter, two sources confirmed 
on Wednesday. 
    The jump of 116 percent underscores a resurgence in Asia's 
appetite for coal that has also been reflected in a recent 
mark-up in spot cargoes for grades used in making steel.  
    "The settlement was done at $200, and we expect the other 
buyers and sellers to use that as the reference for the 
quarter," said one source close to the negotiations.  
    Another source that tracks prices for commodities trading 
companies said the deal with Peabody marked a departure from the 
normal quarterly price-setting mechanism, whereby Nippon and 
Anglo American  AAL.L  typically establish the benchmark.        
    "Anglo American as recently as this week was sticking to 
demands for a price as high as $212 a tonne, which the Japanese 
balked at," this second source said. 
    Anglo was threatening to drag the talks out further into the 
quarter, with no guarantee of a final outcome, the source said. 
    Anglo American said it would not comment on any price 
negotiations.  
   "Peabody, because it is in bankruptcy and in need of cash 
flow, did not want to take the chance it would have to wait for 
payments on coal deliveries and decided to settle at $200," the 
second source said. 
    Peabody could not be immediately reached for comment. Nippon 
Steel declined to comment, saying it does not talk about 
specific deals.      
    In commodities markets, if parties are unable to agree on a 
benchmark price, a system of provisional pricing is invoked. 
This means the benchmark is paid retroactively once an agreement 
is reached, and could lead to months' worth of deferred payments 
until a price is agreed. 
    Peabody, the biggest U.S. coal miner, filed for bankruptcy 
protection in April after a sharp drop in coal prices left it 
unable to service its $10.1 billion debt, much of it incurred 
expanding its collieries in Australia.  urn:newsml:reuters.com:*:nL3N1AR3WP 
    Fairfax Media in Australia in an unsourced report on 
Wednesday said the agreement was signed between the two 
companies after meetings this week. 
    The contract price hike, covering about 60 percent of 
Australia's quarterly exports of around 48 million tonnes of 
metallurgical coal, pushed spot premiums for the grade up by 
more than $10 to above $218 a tonne, the highest in almost five 
years, according to Shaw and Partners analyst Peter O'Connor.  
    The higher prices - spot stood at $75 a tonne in January and 
the contract price at $92.50 a tonne in the third quarter - were 
prompting Chinese traders to offer Australian coal in Chinese 
ports to markets outside the country, O'Connor said.  
    The last time coal prices were this high was in 2012, when 
flooding cut off a third of the world's supply from Australia. 
    Coal mine closures and supply disruptions in China's main 
coal region of Shanxi are helping to drive up prices this year.  
     
 
 (Reporting by James Regan; Editing by Tom Hogue) 
 ((jim.regan@thomsonreuters.com; +612 9373-1814; Reuters 
Messaging: jim.regan.reuters.com@reuters.net)) 
 
Keywords: COAL AUSTRALIA/PRICES