“Our expectation had been for a settlement of $95/t, but extremely weak market sentiment meant that the final outcome represented a premium of just $3/t over the current spot price – the smallest premium in seven quarters,” MWM said.

The broker said it was the lowest settlement since the annual benchmark of $US57.5/t in 2004, with BHP Billiton ushering in quarterly prices with Japanese steelmakers for the commodity in 2010.

“Back then [2004] the seaborne metallurgical coal market was 37% [105 million tonnes] smaller than it is today, Chinese net trade was close to zero million tonnes and average Australian mining costs were just 40% of today’s costs in US dollar terms,” MWM said.

“All of this goes to highlight how much more supply rationalisation the market needs to see. This settlement, which is expected to have a large negative impact on all producer margins since ex-

US producers haven’t seen foreign exchange depreciation over the past quarter, is likely to expedite that process.”