XSTRATA COAL says its coking coal customers are "uniformly" against moving to quarterly contract prices, setting the scene for a stoush between coal buyers and sellers over moves to abandon the one-year contract system.
BHP Billiton wants to ditch contracts, but Mark Eames, the head of Xstrata's Australian coal business, told investors the steel mills that buy coking coal were ''fundamentally opposed'' to the move.
A large proportion of coking coal is now sold on one-year contracts. Prices are set early in the year after lengthy negotiations.
But in recent months, miners including BHP, Anglo Coal and Macarthur Coal have indicated they plan to move towards pricing based on a changeable index.
Xstrata customers have told the Anglo-Swiss group that abandoning one-year contracts would disrupt the steel mills' ability to supply their customers.
''For them to effectively set a price for their customers without knowing the costs of their inputs exposes them to considerable additional risk,'' Mr Eames said at an investor briefing in London.
''It exposes the steel makers to considerable uncertainty.''
On the other hand, analysts say that miners advocating the changes stand to gain from index pricing, because it will allow prices to rise more quickly, in line with booming demand from China and India.
Xstrata, the world's biggest thermal coal producer, also said it was keeping a close eye on opportunities in the NSW coal industry, which has recently been swept up in a series of takeovers.
''There remains some potential for consolidation,'' said Peter Freyberg, the chief executive of Xstrata Coal. ''We already have a very significant presence, as do a lot of the other major players.''
However, in a possible reference to a $480 million purchase by the mining tycoon Nathan Tinkler, he said recent deals in the sector appeared to have been overpriced.
Mr Eames gave a bullish view on the outlook for coking coal and thermal coal prices - similar to the upbeat forecasts from other coal companies - as the world economy gathers pace.
Thanks to surging demand from China and dwindling global supply, he said this year's prices would be the second highest on record.
''We are still awaiting recovery in some of our key markets … When these come back in, it bodes very well for the future,'' he said.
In a sign of the potential in China, Mr Eames said the country was building the equivalent of all of Britain's power stations every 15 months, and most were coal-fired plants.
Source: Sydney Morning Herald
No comments:
Post a Comment