BHP Billiton: China 2009 Coking Coal Imports To Be 30 Million Tons
September 16 2009 - 3:42AM
Dow Jones News
BHP Billiton Ltd. (BHP.AU) said Wednesday it expects China's
coking coal imports to be about 30 million metric tons in 2009 and
it expects the recent trend of Chinese buying to continue in the
future.
BHP Marketing President Tom Schutte said he believed the Chinese
buying would continue with 70% of China's steel capacity and
planned growth in coastal provinces that could easily access
foreign coal.
Chinese mills are also building larger blast furnaces that
require better quality coke and therefore more imports of high
quality hard coking coal, he said.
"A lot of it is to do with the proximity of these mills to the
coast as well as the size of blast furnaces," he said.
"It is more efficient, with environmental regulations and so on
becoming tighter, that big blast furnaces use higher quality coking
coals."
As traditional buyers of seaborne coking coal scaled back
imports this year, China has stepped in to fill the demand gap,
with cheaper freight rates helping to make foreign coal attractive
to Chinese mills.
Some have argued that rising freight rates could crimp Chinese
buying but Schutte said he did not believe this would be the
case.
"We are quite comfortable that there is quite a lot of (freight)
supply coming into the market over the next two years," he
said.
Schutte restated BHP's strong preference for floating or indexed
pricing mechanisms for commodities rather than annual resets of
pricing as has been the norm for products like iron ore and coking
coal.
BHP would happily move all of its iron ore to indexed pricing
over time, Schutte said, but the miner will continue to hold annual
pricing talks for product that is contracted to be sold under the
benchmark system.
Iron ore miners are still locked in a stand off with China over
benchmark prices for the year started April 1, 2009 and Schutte
said talks on next year's benchmark have not yet begun.
BHP has made some progress in moving traditional coking coal
customers to more regular repricing, Schutte said, with some
agreeing to move to quarterly pricing referenced to spot
prices.
"We have in certain instances managed to renegotiate some of the
prices to a shorter term but the progress in that space is quite
new," he said.
Schutte said the real state of commodities demand would only
become clear in 2010 but that China had made a
stronger-than-expected recovery with indicators remaining
positive.
BHP has been watching developments in the case of the detention
of four Rio Tinto Ltd. (RTP) iron ore marketing employees by
Chinese authorities, he said, but the miner has not made any
changes to how it operates in China as a result.
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com