×

Nippon Steel Agrees to 300% Markup for Coking Coal

Nippon Steel said on Wednesday it will pay BHP Billiton Mitsubishi Alliance (BMA), the world's biggest coking coal producer, $300 a ton for term supplies of coking coal in the year that began on April 1.

Steel_Rolls_250x188.jpg

That is a huge markup of over 300% from 2007/08, when it paid $98/ton. Sharp rises in prices of raw materials, such as iron ore, coal, alloys, freight and scrap, are expected to dent the earnings of global steelmakers this year.

BMA is a joint venture between BHP Billiton and Japanese trading house Mitsubishi Corp.

The price hike comes on top of a 65 percent jump in the price of iron ore, another important raw material, that Nippon Steel has agreed to pay Brazilian miner Vale.

Some analysts expect Japanese steelmakers to face stronger cost pressures due to heavier reliance on imports of raw materials than rivals such as ArcelorMittal.

ArcelorMittal, Chinese and Russian mills rely more on iron ore and coal from their own mines or from domestic mines, less exposed to surging freight costs.

A stronger yen could also take a toll on Japanese steelmakers' earnings in the new business year as it would make steel, cars and other finished products more expensive in overseas markets, which may cool demand.

Nippon Steel expects its first profit decline in six years for the year that ended on March 31.

Costs for the Japanese steel industry could rise more than 3 trillion yen ($29 billion) this business year, topping the industry's own earlier estimate of 2 trillion yen, a Nippon Steel spokesman said.