Coke & Allied Sees Coal Demand Pick-up Later This Year

Australia's Coal & Allied Ltd said on Friday it anticipated a pick-up in demand for semi-soft coking coal later this year as steelmakers use more for blending in blast furnaces, though sales will still be down 10-15 percent.

Cutbacks in steel production by more than 30 percent to date among some customers reeling from the global crash in industrial output has lowered demand for semi-soft coking coal, particularly in the first quarter of 2009, Chairman Chris Renwick told the company's annual meeting of shareholders.

"The forecast demand for semi-soft coal in 2009 however will be greater than the proportional cut in steel production, as steel mills move to a higher proportion of semi soft in the coke blend throughout the rest of 2009," he said.

Tom Albanese, chief executive of Brisbane-based Coal & Allied's 76 percent-owned parent company Rio Tinto, this week forecast a second-half recovery in steel making in China, the world's biggest supplier.

Still, Renwick said Coal & Allied expected to see a 10 to 15 percent drop in semi-soft coal sales in 2009 from its collieries in eastern Australia.

Semi-soft benchmark prices had yet to be established, though negotiations with buyers were "progressing", he also said.

Nippon Steel Corp in late March sealed a year-on-year discount of around 57 percent on coking coal contracts with Coal & Allied rival BHP Billiton Mitsubishi Alliance (BMA) for fiscal year 2009/10.

Semi-soft coking coal has some coking properties and is blended with hard and semi-hard coking coals to produce coke, essential in conventional steel making.

Last month, Coal & Allied concluded price negotiations for thermal coal on all its annual Japanese contracts at $70-$72 a tonne, but price talks in other regions were still under way, Renwick said.

Those prices were in line with terms reportedly reached in March by world No. 1 thermal coal miner Xstrata with some Japanese customers, but this is higher than thermal coal prices on the globalCOAL Newcastle weekly index of $63.02 a tonne.

Overall demand for thermal coal was soft, though not off as much as the steel-making coal and was expected to pick up in the second half of the year, Renwick said.

"The general economic downturn has had a more adverse impact on the steel industry and the overall requirement for coking coal," he said.

Source: Reuters