Posco to Buy Australian Coking Coal in 1Q at US$165/Ton - Source

First Published Friday, 7th December 2012 06:37 am - © 2012 Dow Jones

By Rhiannon Hoyle and David Winning

SYDNEY--South Korean steelmaker Posco (005490.SE) has agreed to buy premium hard coking coal from two mines owned jointly by BHP Billiton Ltd. (BHP) and Mitsubishi Corp. (8058.TO) at US$165 a metric ton for delivery in the first quarter of next year, a person familiar with the matter said Friday.

It represents a 3% decline on the US$170 a ton price settlement for the previous quarter. Prices agreed between Posco and the BHP-Mitsubishi Alliance, or BMA, set a benchmark that other steel mills are likely to use in their own supply negotiations.

Coking coal prices have fallen sharply this year due to slack demand in key Asian markets. China's economy has slipped to its slowest rate since early 2009, exacerbating an oversupply of steel.

Coal volumes will be shipped from the BMA's Peak Downs and Saraji mines in Queensland state, the person told Dow Jones Newswires.

Separately, Posco has also agreed to buy coal from the BMA's Goonyella mine at a price of US$161 a ton for delivery in the January-March period, the person said.

A spokeswoman for BHP declined to comment, saying it was the Melbourne-based company's policy not to discuss pricing of the commodities it sells.

-Write to Rhiannon Hoyle at [email protected] and David Winning at [email protected]

-Robb M. Stewart contributed to this article.