Bloomberg News

Coking Coal Exports From U.S. May Slow on BHP Labor Accord

July 06, 2012

Coking coal exports from the U.S. may slow after BHP Billiton Ltd. (BHP) and labor unions in Australia reached an accord, according to Raymond James Financial Inc.

U.S. shipments of the steelmaking component in the first quarter were about 17.5 million short tons, up 2.1 percent from a year earlier, Energy Department data show, as producers benefited from a void caused by rolling strikes at the world’s biggest coking coal exporter since June 2011.

BHP and the unions, after beginning mediation July 3, agreed on a framework that will guide the finalization of an enterprise pact, the Melbourne-based company said in an e-mailed statement today.

“There’s the fear that this has been keeping supply out of the market,” said Jim Rollyson, an analyst at Raymond James Financial Inc. in Houston. “You have to assume that slows down a bit.”

Rollyson estimates that the global benchmark contract for coking coal could fall at least 6.7 percent to $210 a metric ton in the next quarter from $225 a metric ton for the July-to- September period, because of the increased supply.

Gerard McCloskey, chairman of Merlin Trade and Consultancy Ltd and founder of IHS’s McCloskey Group, a Petersfield, U.K- based coal-market research company, estimated June 21 that harmony between BHP and its unions could pour an additional 20 million tons of the steelmaking fuel into the global market.

Force Majeure

The BHP Billiton Mitsubishi Alliance, or BMA, is the world’s biggest exporter of steelmaking coal. About 3,000 miners at seven operations stopped work for a week in March and in April, BHP declared force majeure because of the strikes and inclement weather.

Metallurgical coal represented 65 percent of the U.S.’s exports of the fuel in 2011, according to Energy Department data.

In the U.S. the component is mined in Appalachia, which covers parts of Kentucky, Ohio, Virginia, West Virginia and Alabama.

The BMA joint venture supplies about 18 percent of global coking coal exports, according to a March 22 report by Goldman Sachs Australia Pty.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.


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