BHP jacks up coking coal prices 55%

BHP Billiton, the world’s top coking coal producer, has signed a coking coal deal with Indian steelmakers at $200 per tonne, up 55% from last year’s prices.

Last year’s benchmark prices were $129 per tonne and were yearly contracts. However, the latest deal is signed only for the first quarter ending June 30, 2010.

“The company has reached agreement with a range of customers throughout Europe, China, India and Japan,” BHP said in a statement.

The price increase by the Australian company is in line with expectations.

Prasad Baji, senior vice-president, Edelweiss Securities Ltd, said steelmakers should be able to pass on this cost to consumers. “The spot prices are hovering at $220 per tonne, so the contract prices had to be in that range. More or less, the prices are along the expected lines.”

Pawan Burde, vice president (research), PINC Research said the industry was expecting a price rise of around $180 per tonne. “Steelmakers will have to increases prices by $60-70 per tonne.” Burde believes due to the strong steel demand in the country and robust auto and infrastructure spending, passing on this cost to the consumers won’t be a problem.

Indian steelmakers are largely dependant on imported coal. Tata Steel imports around 30% coking coal, its UK subsidiary, Corus, buys its entire coal from the market. JSW Steel, too, imports 100% coking coal and state-owned Steel Authority of India (SAIL) imports 70% of its coking coal needs.

JSW Steel, India’s third-largest steelmaker, is looking to import 5.5 million tonne of coking coal for FY11 to meet its ramped up production. The company used 4.5 million tonne of coking coal in FY10.

SAIL spokesperson RK Singhal declined to comment, saying SAIL hasn’t entered into coking coal contract as of now. Seshagiri Rao, joint managing director and group CFO, JSW Steel did not comment for the story. Sanjay Choudhry, spokesperson, Tata Steel too, did not comment.