Nippon Steel will pay BHP Billiton Mitsubishi Alliance (BMA) US$120 a metric ton for coking coal, while Kobe Steel will pay BMA US$125 per ton next fiscal year from April, according to the Asian Wall Street Journal.
Earlier Xstrata settled with a Brazilian steel maker at an unprecedented $US137 a tonne for a small quantity of coking coal but this was not seen as a price-setting deal.
The $US120 price agreed by Nippon Steel for premium hard coking coal is predicted to bump up BHP Billiton’s profits by around 8%.
Over the next two years analysts predict coking coal prices will remain above $US100 a tonne as export ports struggle to move coal and new mines enter the production stream.
Iron ore prices are also expected to be increased by between 20% and 30% for 2005-06 shipments. Negotiations are also under way between Australian iron ore exporters and the Japanese steel mills for next year's contract iron ore prices.
Rapid economic global growth is driving steel demand with several major Japanese steel producers in the process of increasing steel output.
JFE Holdings Steel Corp and Kobe Steel are working on plans to increase crude steel output by of 5-10% to meet the demand. China's biggest steel maker, Baosteel has already indicated plans to raise prices on high-end hot and cold-rolled products by up to 11% in the first quarter of 2005.
Higher coal prices have already been passed on to customers such as car makers, ship builders and machinery manufacturers in the form of higher steel prices. Major mining equipment manufacturers are feeling the crunch too with a global scramble on to secure steel supplies next year in a burgeoning mining market.
In a related measure, RAG and a number of steel companies are in the process of expanding the Prosper cokery in Bottrop by 105% or 1.25 million tonnes per year under a 300 million euros programme. The group included ThyssenKrupp, Stahlwerke Bremen, Peine-Salzgitter and Austria's Voest Alpine. The Prosper plant uses 40% Australian coal for its coke production.
Meanwhile, forecaster ABARE expects an additional 12.5Mt of coal exports, or a 5.8% increase, as significant new capacity comes on line.
