Australia's export revenues will take a $20 billion hit in 2009-10 after the collapse in world steel production forced coking coal producers to wear a 60 per cent price cut in contract prices.
The blow to export revenue follows on from the $4 billion hit for 2009-10 taken by Australia's thermal coal exporters earlier in the month and increases expectations iron ore exports will fall by at least $7 billion when contracts negotiations are settled.
The savage fall in coking coal prices from $US300 ($A435) a tonne to an average of about $US125 a tonne was the result of benchmark negotiations this week by the world's biggest producer, the BHP Billiton Mitsubishi Alliance (BMA), and Japan's Mitsubishi Corp.
BHP would not comment on the settlement yesterday, but industry analysts said the settlement, ranging from $US129 a tonne for top quality Peak Downs coal and $US115 a tonne for the lesser quality Gregory coal, would be the reference point for all other settlements.
Despite the severity of the price crunch, it was not unexpected. Mark Pervan, head of commodities research at ANZ, said the BMA settlement was in line with his forecasts and market consensus for a $US120-$US130 a tonne price settlement for the steel-making raw material.
Mr Pervan said the big unknown was what was said in the negotiations about volumes. He suspects new contract tonnes could surprise on the downside, given Japan's steel industry was on its knees in January with output down by 38 per cent year-on-year.
"Iron ore prices are now next on the agenda — the 60 per cent drop for coking coal puts our 40 per drop for iron ore very much in the ball park," Mr Pervan said.
The earlier price cut for thermal coal saw its price for deliveries starting from April 1 reduced from last year's $US125 to $US70 a tonne. That was also in line with market expectations.
Source: The Melbourne Age
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