The company is well positioned to meet demand from China – where coking coal imports grew to 30 million tonnes per annum in the 2009 calendar year – and to negotiate prices in April when a 50% price increase in coking coal is possible, according to some analysts.

“Physical demand for bulk commodities continues to be very strong in most regions following the aggressive destocking during the economic downturn,” BHP said.

“Commodity markets will continue to be largely dependent on Chinese and Indian demand. In the short term, it is critical to monitor the pace of monetary tightening and the rate of loan growth for commodity-intensive sectors in China.”

Underlying earnings before interest and tax for metallurgical coal was $US772 million for the six months to December 2009, a decrease of $2.35 billion or 75.3% from the corresponding period.

This decrease was mainly due to the lower realised prices for hard coking coal (50%), weak coking coal (54.6%) and thermal coal (30.5%). Performance of carryover volumes from the 2008 contract year (Japanese financial year) partly offset the price decrease.

Record quantities of coking coal were shipped in the half-year in response to stronger market demand. In addition, operating costs were lower due to full recovery from rainfall events at Queensland Coal and improved mining conditions at Illawarra Coal. However, a stronger Australian dollar against the US dollar had an unfavourable impact of $US391 million on underlying EBIT.

Underlying EBIT for energy coal was $US332 million, a decrease of $740 million or 69% from the corresponding period. This was mainly due to lower average export prices which reduced earnings by $655 million. The positive impact of price-linked costs was $49 million.

Underlying EBIT was also adversely affected by the weaker US dollar and inflationary pressures in Australia and South Africa, though operational costs were well controlled.

Higher volumes due to record sales from Hunter Valley Energy Coal and the profit on the dissolution of the Douglas Tavistock Joint Venture arrangement partially offset the decrease in earnings.

Higher metallurgical coal sales volumes, which were previously affected by significant demand contraction, increased underlying EBIT by $US746 million.

Strong growth in sales volumes on the back of demand recovery, particularly in the steelmaking raw materials (iron ore, metallurgical coal and manganese) and good cost control across the business helped to partially offset the negative impact of lower prices and stronger producers’ currencies, BHP said.