Coal Producers Leave EJC Disappointed After Buyers Turn Backs on Quarterly Pricing

Oct. 21, 2012 - PRLog -- At last week’s Empowered Joint Committee meeting in India, several coal producers have been forced to walk away empty handed with no quarterly contracts settled with major buyer SAIL. BMA was the only company to reach a deal, agreeing to provide one cargo in October and two in November of its Indian-special Barwon brand, a Gregory/Peak Downs combo, more weighted to Gregory.

According to sources, the pricing has been done on a roughly 50/50 split between the monthly price and the quarterly price.

The monthly price for Barwon is roughly in the early $140s and the quarterly roughly $155.

The story is that beyond these three cargoes, BMA has said it can provide five stems for December but only at benchmark price, but that if SAIL intends to take the coal they will need to confirm by November 1.

The main bone of contention has been an increasing level of dissatisfaction with the quarterly benchmark system. Sources say Indian buyers have for some time been sceptical of the headline prices said to have been achieved in Japan, and argue these prices only cover limited tonnes.

The current gap between the quarterly benchmark of $170 and the spot price – ranging between $138-150 – has also made buyers leery of settling against the higher number.

Vizag Steel, or RINL, were said to have been less aggressive, agreeing to the quarterly benchmark with Anglo and BMA, possibly because they are more desperate for tonnes.

US producers, including Alpha have reportedly walked away somewhat disgruntled after the Indian buyers would not even consider opening offers of $140. US producers are believed to supply around 10% of SAIL’s annual coking coal requirements.

Peabody, which supplies out of Queensland, may be in a bit of a pickle after agreeing weeks earlier to provisional pricing of $150.

“They probably wanted to piggyback on BMA and just take the price BMA managed to secure. But that is now all uncertain,” a source in India said.

SAIL is reportedly not particularly short of coal at present with just under 2Mt in stockpiles but come December, things will be a bit different.

“It looks like the majors, Anglo, BMA and Peabody are taking a tough stance with regards pricing in India now,” the source added.

“When SAIL comes looking for another 1Mt the Aussies will wait it out and call their bluff. It’s come down to brinkmanship.”

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