March 26 (Bloomberg) -- The benchmark coking coal contract for the second quarter fell to the lowest level in six years, portending supply cuts for the steelmaking component.
Anglo American Plc agreed to $120 a metric ton, down 16 percent from the $143 negotiated for the first quarter and the lowest since the April 2007 to March 2008 annual contract, Doyle Trading Consultants LLC, a Grand Junction, Colorado-based coal analytics company, said today.
“It shows that there is going to be further pressure on suppliers to rationalize production,” said Mike Dudas, an analyst at Sterne Agee & Leach in New York. “This is likely to set movement in action in relation to production.”
James Wyatt-Tilby, a spokesman for Anglo in London, declined to comment, citing company policy.
Demand for the steelmaking ingredient has waned as consumption in China cooled, Dudas said.
Spot coking coal prices in China have declined 31 percent to $107.50 a ton in the past year, according to data compiled by Bloomberg.
While thermal coal is used to generate electricity, the metallurgical variety is needed to forge steel.
Prices touched a record $330 a metric ton in 2011 as floods swamped mines in Australia’s Queensland, the world’s biggest exporter of coking coal.
“Except for a limited number of individual met mines in the U.S., and several major producers in Australia and Canada, this is well below levels needed for sustainable production,” Daniel Scott, an analyst at Cowen & Company LLC in New York, wrote in a report.
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