BHP Billiton Ltd. 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.
Dow Jones Newswires |
