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Nippon Steel settles 3Q semi-soft contract at $115/t

Source: Google, September 20, 2019

Japan's Nippon Steel has agreed to a third-quarter contract price of $115/t fob Australia for semi-soft coking coal with a Hunter valley producer.

This represents an 11pc fall from its second-quarter semi-soft price of $129/t fob. This matches semi-soft spot market falls. The quarter-to-date average of the Argus mid-volatile semi-soft index at $106.27/t fob Australia is down by 11pc from the second-quarter average of $119.51/t fob.

Nippon's price for July-September did not come as much of a surprise to the market, as premium hard coking coal prices also fell over the same period. "$115/t fob was well within the range that we expected, at about 65pc of the quarterly average of premium hard coking coal prices," a Japanese trader said.

Nippon's price is also lower than the third-quarter settlement price of $124/t fob that JFE Steel agreed to with Australian mining firm Stanmore. This mainly stems from JFE's settlement occurring in July when spot prices were much higher.

Japanese steel producers settle semi-soft and pulverised coal injection (PCI) coal prices at different intervals. JFE negotiates ahead to the next quarter just before it starts, while Nippon looks back at a quarter to negotiate toward its end. Premium hard coking coal prices settle against index averages.

JFE Steel is now negotiating with Australian producers for October-December PCI and semi-soft contract prices.

Nippon and South Korean steel producer Posco agreed to a PCI price of $127/t fob for July-September deliveries earlier this month.

Given the downtrend in market prices, Japanese steel mills are in no hurry to settle their contract prices. There is little risk of an upside given the growing number of premium hard coking coal cargoes in the market and the relative lack of immediate demand in the PCI segment.

The quarter-to-date average of the Argus premium low-volatile PCI index has fallen by 21.2pc over the July-September period.

News Source: Argus Media