There was no news on what price Anglo American had obtained, but earlier this week it was reported that BHP Billiton had also settled for $109.50/t with Japanese steelmakers – although Platts claimed at the time that this was only for small volumes under a “holiday contract” that was akin to a “spot deal”.
“Such a settlement would be much lower than Anglo American's contract price offer at $116/t free on board last week,” the energy info specialist commented on Tuesday.
However, with Rio and Peabody signing on at $109.50/t it appears momentum is growing for that to be the new Asian benchmark price.
The $7.5/t fall from the March quarter benchmark seems significant enough to trigger more job cut backs at the very least.
A recent presentation for the South32 spinoff revealed that BHP Billiton subsidiary Illawarra Coal could have its profitability wiped out by a $4/t drop in metallurgical coal prices.
A presented table on commodity price and currency sensitivities revealed that a $1/t change in metallurgical coal prices had a $6 million impact on South32’s underlying earnings before interest and tax.
Given that Illawarra Coal’s underlying EBIT was estimated to be $20 million, a $4/t fall would eclipse this with a $24 million impact. A $7.5/t fall would equate to a much more serious $45 million hit.
In a footnote, BHP said the commodity prices and exchange rates used to estimate the economic viability of reserves were based on asset-defined or South32 “long-term” forecasts.
