Monday, January 10,
BL reported that India’s steel plants using Australian coking coal must be ready to cough up higher prices for the second quarter contract. This follows devastating floods in the Australian state of Queensland halting exports from the mines accounting for an estimated 50% of the global coking coal capacity.
The heaviest summer rains yet recorded have crippled the export infrastructure in Queensland. The mining companies have declared force majeure, effectively suggesting that they will be unable to meet supply contracts due to events beyond their control. What is causing concern is that even if the mines resume production after some time, the rail and port infrastructure damaged by the torrential rain will take a much longer time to restore.
The coking coal prices are set in quarterly contracts between miners and steel makers. Most contracts have already been settled for the January to March 2011 period, with benchmark Australian coking coal prices agreed at USD 225 a tonne, the second highest ever. The analysts and miners say the recent events will push up the second quarter price significantly.
The apprehension is not without basis. The spot price of coking coal is heading from a level of USD 246 to USD 300 a tonne and likely to rise further and this may be reflected in the next quarterly contracts.
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