22 February 2011
A move by BHP Billiton-Mitsubishi Alliance (BMA) to shorten its coking coal pricing from quarterly to monthly has come up against stiff resistance from its Asian mill customers.
These include Japan's JFE Steel and Sumitomo Metal Industries (SMI), and South Korea's Posco, sources told MB.
"BHP has just offered to shift from quarterly coking coal prices to monthly prices in April 2011. Without going into details, but we are strongly against the idea," said a source at (SMI).
It is simply not workable to move to monthly pricing after having shortened to quarterly pricing just one year ago; it would be impossible for mills to plan production or price its products, he said.
"Our downstream customers have not all accepted quarterly prices for steel products, let alone monthly ones now," he added.
Posco has not received an official monthly offer from BMA, but also opposed shorter pricing terms, said a company source.
"We believe that mills will definitely fight against monthly prices, and coking coal suppliers should not shorten pricing terms regardless of its long-term customers' resentment," she said.
A JFE Steel spokesman would not confirm if it had received BMA's monthly offer, but said it was against "any shorter term contract, including quarterly ones".
2010 saw long-term iron ore and coking coal contracts moved from the long-standing annual pricing scheme to a quarterly one.
Nippon Steel declined to comment and JFE Steel could not be reached. Kobe Steel said it had not received a monthly pricing offer from BMA and declined further comment.
The SMI source does not believe that BMA will succeed in introducing monthly pricing.
BMA was part of a bigger move from annual to quarterly pricing last year, but this time, it was the only one pushing for monthly prices, he noted.
"BMA stands alone this year," he said.
However, coking coal contracts were moving inexorably towards shorter pricing terms, even if the change did not happen for April, said an analyst in Shanghai.
BMA concluded March quarter contract prices for hard coking coal to Japan at $225 per tonne fob Australia, up 7.7% from the previous quarter.
BHP, an early advocate of shorter pricing in general, has been selling most of its iron ore to long-term customers in China on pricing periods of one month or less.
These include Japan's JFE Steel and Sumitomo Metal Industries (SMI), and South Korea's Posco, sources told MB.
"BHP has just offered to shift from quarterly coking coal prices to monthly prices in April 2011. Without going into details, but we are strongly against the idea," said a source at (SMI).
It is simply not workable to move to monthly pricing after having shortened to quarterly pricing just one year ago; it would be impossible for mills to plan production or price its products, he said.
"Our downstream customers have not all accepted quarterly prices for steel products, let alone monthly ones now," he added.
Posco has not received an official monthly offer from BMA, but also opposed shorter pricing terms, said a company source.
"We believe that mills will definitely fight against monthly prices, and coking coal suppliers should not shorten pricing terms regardless of its long-term customers' resentment," she said.
A JFE Steel spokesman would not confirm if it had received BMA's monthly offer, but said it was against "any shorter term contract, including quarterly ones".
2010 saw long-term iron ore and coking coal contracts moved from the long-standing annual pricing scheme to a quarterly one.
Nippon Steel declined to comment and JFE Steel could not be reached. Kobe Steel said it had not received a monthly pricing offer from BMA and declined further comment.
The SMI source does not believe that BMA will succeed in introducing monthly pricing.
BMA was part of a bigger move from annual to quarterly pricing last year, but this time, it was the only one pushing for monthly prices, he noted.
"BMA stands alone this year," he said.
However, coking coal contracts were moving inexorably towards shorter pricing terms, even if the change did not happen for April, said an analyst in Shanghai.
BMA concluded March quarter contract prices for hard coking coal to Japan at $225 per tonne fob Australia, up 7.7% from the previous quarter.
BHP, an early advocate of shorter pricing in general, has been selling most of its iron ore to long-term customers in China on pricing periods of one month or less.
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