* Peabody, Nippon set Q4 metallurgical coal benchmark
* Price more than doubles from Q3 to $200/T
* Increase follows spot price gains
(Adds quotes, details)
By James Regan
SYDNEY, Oct 12 Peabody Energy Corp
and Nippon Steel have set the fourth quarter
metallurgical coal contract benchmark at $200 a tonne, more than
twice the price in the previous quarter, two sources confirmed
The jump of 116 percent underscores a resurgence in Asia's
appetite for coal that has also been reflected in a recent
mark-up in spot cargoes for grades used in making steel.
"The settlement was done at $200, and we expect the other
buyers and sellers to use that as the reference for the
quarter," said one source close to the negotiations.
Another source that tracks prices for commodities trading
companies said the deal with Peabody marked a departure from the
normal quarterly price-setting mechanism, whereby Nippon and
Anglo American typically establish the benchmark.
"Anglo American as recently as this week was sticking to
demands for a price as high as $212 a tonne, which the Japanese
balked at," this second source said.
Anglo was threatening to drag the talks out further into the
quarter, with no guarantee of a final outcome, the source said.
Anglo American said it would not comment on any price
"Peabody, because it is in bankruptcy and in need of cash
flow, did not want to take the chance it would have to wait for
payments on coal deliveries and decided to settle at $200," the
second source said.
Peabody could not be immediately reached for comment. Nippon
Steel declined to comment, saying it does not talk about
In commodities markets, if parties are unable to agree on a
benchmark price, a system of provisional pricing is invoked.
This means the benchmark is paid retroactively once an agreement
is reached, and could lead to months' worth of deferred payments
until a price is agreed.
Peabody, the biggest U.S. coal miner, filed for bankruptcy
protection in April after a sharp drop in coal prices left it
unable to service its $10.1 billion debt, much of it incurred
expanding its collieries in Australia.
Fairfax Media in Australia in an unsourced report on
Wednesday said the agreement was signed between the two
companies after meetings this week.
The contract price hike, covering about 60 percent of
Australia's quarterly exports of around 48 million tonnes of
metallurgical coal, pushed spot premiums for the grade up by
more than $10 to above $218 a tonne, the highest in almost five
years, according to Shaw and Partners analyst Peter O'Connor.
The higher prices - spot stood at $75 a tonne in January and
the contract price at $92.50 a tonne in the third quarter - were
prompting Chinese traders to offer Australian coal in Chinese
ports to markets outside the country, O'Connor said.
The last time coal prices were this high was in 2012, when
flooding cut off a third of the world's supply from Australia.
Coal mine closures and supply disruptions in China's main
coal region of Shanxi are helping to drive up prices this year.
(Reporting by James Regan; Editing by Tom Hogue)