“BHP Billiton Ltd. (BHP), the world’s biggest exporter of steelmaking coal, may face a drop in contract prices to a record low in the third quarter amid rising supply and weaker Asian demand.
Asian buyers will probably pay $165 a metric ton for hard coking coal in the three-month period starting July 1, according to the median estimate of five analysts surveyed by Bloomberg News. That would match the record low for contracts set in the first quarter and compare with $172 a ton in the second quarter. Spot prices have slid 11 percent since March, data compiled by Bloomberg show.
Rising supply from Mongolia and South Africa has added to an increase from Australia, which is rebounding from January floods that shut rail lines and curbed exports. A slowing Chinese economy is also causing weakness in the price, Shuma Uchino, the chief financial officer of Mitsubishi Corp. (8058) said in Tokyo on May 8. The Japanese company is a partner in the world’s biggest exporter, the BHP Billiton Mitsubishi Alliance.
“There’s too much supply,” said Daniel Hynes, the Sydney-based head of commodity strategy at CIMB Group Holdings Bhd. (CIMB) who predicts contracts may be settled at $180 a ton. “There’s a recovery from the Australian market, which is compounding weak demand from China and Japan, the biggest importer of premium hard coking coal. That has meant that the market has remained relatively weak.”
