The push towards short-term pricing of coking coal

BHP Billiton has agreed to sell its coking coal on short-term contracts to customers in Europe, China, India and Japan, breaking away from the annual pricing structure.
Wesfarmers has also moved to quarterly pricing arrangements with its customers for about 75 per cent of contract metallurgical tonnage from its Curragh mine in Queensland.
The risk of volatility as global steel-making coal markets strengthen has led to creation of several new indexes for coal. The first of these were launched by Energy Publishing on February 26th, after months of discussions with coal producers, traders and buyers.
This was in response to a push for short-term pricing by large producers of coking coal and the development by Energy Publishing of a set of specifications defining three coals generally agreed to be at the top of the market.
The three indexes are CCQ, based on premium hard coking coal shipped from Queensland; CCH-LOW, based on premium low vol coking coal shipped from the East Coast of the US and CCH-HIGH, a Type A high vol coking coal also shipped from the East Coast of the US.
On March 15th, another information provider Platts, came out with the first daily metallurgical coal assessments.
The publisher said these new assessments address miners' and steel mills' needs for an independent daily spot assessment in the burgeoning Asian market to better determine pricing for short- and long-term contracts.
The two assessments reflect hard coking coal loading in Australia for any destination and delivered into China from any potential source.
"These new assessments, along with a dry bulk freight price from Australia to China, allow us to deepen our analysis of blast furnace economics, particularly those in China," said Platts global director of steel, Francis Browne.
"It's our hope the price transparency provided by Platts for this vital steel making ingredient will meet the global industry's need for comparative valuations of coking and other metallurgical coals," said Browne.
Platts also launched a daily dry bulk freight assessment representing the cost of freight for cargoes carried on Panamax class vessels from Australia to China as a normalisation guide in the coking coal price assessment process.

Get the latest information face-to-face
The Australian Journal of Mining will host a one day industry briefing giving delegates the opportunity to hear first hand how this new pricing paradigm will lead to a number of significant changes within the market for coking coal.
Speakers at the briefing include Neil Bristow, Managing Director, TZ Ferrous Commodities; Francis Browne, Director of Market Reporting, Platts Metals Group; Steven Randall, Managing Director, The Steel Index and Tom Price, Global Commodity Analyst, UBS.
Details: Sydney Harbour Marriott, Circular Quay, Wednesday June 30th
For more information visit: www.informa.com.au/coalindex