August 29, 2008

Nippon Steel and BHP agree on tripling of coal price

Bloomberg reported that Japan’s Nippon Steel Corp has agreed to pay BHP Billiton Ltd and Mitsubishi Corp. three times more for coking coal this year.

Mr Hiroshi Nakashima a spokesman for the Tokyo based company said that Japan's largest mill will pay USD 300 a ton for the year started April 1st up from USD 98 a tonne in the year just ended.

Mr Nakashima said that the jump in contract prices for the steelmaking material will add about JPY 3 trillion (USD 29 billion) to costs for Japan's blast furnace mills. Nippon Steel and its biggest domestic rivals have said profit probably fell in the year ended March 31 because of soaring prices for iron ore and coking coal.

The agreement between Nippon Steel and the BHP Billiton Mitsubishi Alliance, the world's largest coking coal exporter, comes after POSCO, Asia's third biggest steelmaker, agreed to pay three times as much for its coking coal.

Mr Atsushi Yamaguchi a Tokyo based analyst at UBS AG said that an increase in coking coal to about USD 300 a tonne was inevitable. He added that Japanese steelmakers will have to raise average selling prices for products by more than JPY 20,000 a tonne to offset increasing materials prices.

Ms Emma Meade a BHP spokeswoman said that “We don't comment on price negotiations.”