Coking Coal contract price could rise 33% on Australian floods

MS, BAC, BHP, RIO

Steel makers in Asia may be forced to pay as much as 33% more for hard coking 
coal after the worst floods in 50 ys in Australia's Queensland state disrupted 
output from the World's biggest shipper.

Prices may increase to between US$270 and 300 a metric ton, an analyst Morgan 
Stanley (NYSE:MS) said. Mills agreed to pay US$225 a ton for the three months 
starting January 1, Bank of America Merrill Lynch (NYSE:BAC) analysts said last 
month.

Rain in the Australian state of Queensland has inundated an area the size of 
France and Germany, prompting BHP Billiton Ltd (NYSE:BHP) and Rio Tinto Group 
(NYSE:RIO) to declare force majeure, a legal clause that allows mines to miss 
deliveries.

About 37% of the World's traded coking coal is affected. Queensland floods in Y 
2008 left steel producers, including Japan's Nippon Steel Corp. PK:NISTY) and 
JFE Holdings Inc.(GER:JFR), with a threefold increase in annual contract prices 
to about US$300 a ton.

Australian free-on-board prices may climb to US$270 a ton for 3 month contracts 
starting April 1 as the floods threaten to take as much as 10 million tons of 
metallurgical coal out of the market according to a source.—Paul A. Ebeling, 
Jnr. www.livetradingnews.com



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