BHP loses 10% on coking coal contract

Coking coal contract with Japanese steelmakers is worth less now than it was last year.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The BHP Billiton (ASX: BHP) Mitsubishi Alliance (BMA) has endured a 10% coking coal price cut with major buyer Nippon Steel, marking the first contract to be below the spot coking coal price in over two years.

On Thursday last week, both BMA and Anglo American reportedly agreed on US $152 per tonne as the contract price for the fourth quarter with Nippon Steel and Sumitomo Metal Corp. On Friday, the commodity was trading at US$152.50 – a substantial increase from the US$130 per tonne levels recorded in July.

However, although the contract price reflects a US $7 per tonne increase compared to the September quarter, it is also 10% lower than the US $170 agreed upon for the previous corresponding period (fourth quarter of 2012).

Coking coal has climbed in value in recent months despite strong supply having outstripped demand. Chris Drew from RBC Capital Markets said “China continues to import at elevated levels, but we do not expect this to aggressively drive up prices… Rather it should help absorb surplus supply. Australian exports have lifted through the year, and the US continues to export at elevated rates.”

Foolish takeaway

Despite the volatility facing the sector, BHP has managed to climb 1.9% since the beginning of the month. Although it maintains a much higher degree of diversification than competitors such as Rio Tinto (ASX: RIO) or Fortescue Metals Group (ASX: FMG), it would still be wise to wait for a more attractive entry point or until volatility begins to subside.

In the meantime, are you interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading


Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »