Nippon Steel Corp., Japan’s largest mill, will pay up to 67 percent less for semi-soft coking coal this fiscal year, two industry executives with knowledge of the deal, have said.
The mill will pay $80 - 85 a metric ton for the coal for the year started April 1, down from $240 a ton a year earlier, said the executives, who declined to be identified as the agreement is confidential. The deal for the Australian coal was reached with Xstrata Plc, the executives said today.
Steelmakers in Asia and Europe are slashing production as a global economic slowdown curbs demand from builders and carmakers. Japan’s steel output dropped by a record 44 percent in February from a year earlier to the lowest in four decades. Nippon Steel last month also won a 57 percent price cut for hard coking coal for this fiscal year and a 63 percent drop for pulverized coking coal, according to industry executives.
“The price cuts for all the varieties of coking coal will have roughly a 10,000 yen ($100) a ton cost benefit per one ton of steel products,” UBS AG analyst Atsushi Yamaguchi said.
Nippon Steel had sought a return to the 2007 price level of $65 a ton for semi-soft coking coal.
Hiroshi Nakashima, a spokesman at Tokyo-based Nippon Steel, said he couldn’t comment on raw material prices. James Rickards, spokesman for Zug, Switzerland-based Xstrata’s Australian coal unit, said the company didn’t comment on price negotiations.
Source: Bloomberg
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