Analysts are predicting that negotiations between steelmakers and Xstrata Coal and Coal & Allied could result in suppliers of semi-soft coal achieving prices of around $US142 per tonne.

Going forward, suppliers are pushing to peg prices for semi-soft coal at about 80% of hard coking coal prices, which would translate to $US231/t, assuming hard coking coal reaches an expected $US300/t this quarter.

“The effects of flooding in Queensland’s Bowen Basin is manifesting itself in rapidly rising coking coal prices. The company is yet to agree its coking coal pricing for the January-March 2011 quarter; however, a substantial increase in price is expected,” Gloucester said in its recent quarterly report.

“In addition, the company has an uncontracted volume of coking coal available for sale during the quarter and as such should be well positioned to benefit from the surge in spot prices.”

The company “focused considerable effort on expanding the market for Gloucester coking coal with existing Japanese steel mill customers and new customers, in anticipation of the almost doubling of tonnage over the next 18 months”

“Discussions were positively received and the company is well placed to expand trade volume with its traditional customers, while continuing to expand sales to new markets.”

Gloucester’s coking coal sales were 222,000t for the quarter compared to 149,000t in the December 2009 quarter, an increase of 49% and a quarterly record for the company.

With the extension of its Duralie operations (up to 3 million tonnes per annum run-of-mine), including the commencement of mining of the Clareval seam from January 2011, sales of coking coal are expected to rise in both total volume and as a percentage of the company’s coal production.

With project approvals now in place, permitting pit extensions and increased production, Gloucester is implementing its staged ramp-up plans to achieve a ROM production rate of 4Mtpa by the end of FY2011 to achieve a product coal rate of 2.7Mtpa.

The company is assessing options to accelerate the rate of the production increases in order to maximise its production of coking coal in the current fiscal year.

The capital expenditure to support the first step of the production increase has been largely completed. Works to increase the flotation and filtration capacity to improve the yield of finer coals remains on schedule with foundation works beginning last month with completion by the end of FY2011.

Works are also underway to extend the rail loop at Stratford and the building of water management infrastructure at Duralie.