Talks to set annual coking coal prices will resume this week as representatives of Australian and Canadian miners meet with Japanese steel mills who are demanding a return to 2007 contract prices of US$98 a metric ton according to a report from Macquarie Bank.
Last year the contract settlement was US$300/ton but with global steel prices down 40%, Japanese mills are demanding a much lower price. Coal producers cite higher costs and recent spot price sales into China to support contract prices at more than US$130/ton, Macquarie said.
The bank forecasts a 2009 benchmark of US$110/ton.
Recent sales into China concluded at between US$130-US$150/ton, with Chinese domestic prices at US$150-US$160/ton.
The bank expects support for such high domestic prices to be limited:
"Given the weakness in global demand and our view that the coking coal market will remain comfortably supplied, we would expect contract prices to have to trade down to levels that put high-cost producers under threat of closure," Macquarie added.
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