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Argus selected to price Japanese coking coal imports

Published by
World Coal,

Japan's largest steelmaker Nippon Steel and Sumitomo Metal is indexing its coking coal imports using assessments that include Australian premium hard low-volatile coking coal export prices published by leading global commodity price reporting agency Argus.

Other steel mills in Japan and South Korea typically follow Nippon Steel's lead in quarterly negotiations and are still discussing options for pricing coking and pulverised coal injection (PCI) coal. Argus is one of three companies selected by the mill and its suppliers as a provider of coking coal prices for indexation of physical supply contracts.

Nippon Steel's decision follows periods of extreme price volatility in spot coking coal markets caused by weather and mining-related supply shocks. High-quality Australian coking coal export prices rose to more than US$300/t in November from less than US$100/t in August, after supply was disrupted by two force majeure declarations at mines in Australia and the introduction of mining restrictions in China. Prices again spiked above US$300/t in early April after Cyclone Debbie flooded coal transport links in Queensland, disrupting Australian coking coal exports until late April. These disruptions strained quarterly contract negotiations between Japanese and South Korean steel mills and Australian mining firms in late 2016 and during the second quarter this year.

"Miners and mills have largely used 'index baskets' — an average of two or more indexes — in their supply arrangements to date, with indexation at an early stage of adoption," noted Tim Hard, Argus Vice-President of metals, Asia. "In the Australian premium coking coal segment, Argus has typically formed 50% of the mix in the overwhelming majority of fob indexed supply arrangements concluded over the last 24 months."

Argus Media chairman and Chief Executive Adrian Binks said:

"We are pleased that Nippon Steel has selected Argus assessments to help price coking coal imports. This market is still maturing, and so it requires an approach that supplements liquidity with active engagement of the market. This shows the quality of our price reporting and the confidence of the market in our methodology." Argus publishes daily coking coal assessments in Argus Steel Feedstocks and Argus Iron Ore Bulletin. These reports provide price assessments, news and market commentary on the international spot markets for steel and steel feedstocks. Argus coking coal prices are widely used in contracts by major Asia-Pacific and North American seaborne coking coal suppliers.

Argus calculates its price assessments using a volume-weighted average of deals done and a survey of market participants. The fob Australia premium hard coking coal low-vol index tracks spot trade of coking coal with a minimum 67 CSR, maximum 25% volatile matter and minimum 25 000 t lot size for prompt 90-day delivery free on board (fob).

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