JFE, Peabody settle PCI contract prices for 1Q 2018

US-based metallurgical coal producer Peabody Energy and Japan's JFE Steel have agreed to a term contract price of $156.50/t fob Australia for January-March supplies of Coppabella pulverised coal injection (PCI).

The settlement is 22.7pc higher than the fourth-quarter price of $127.50/t fob Australia agreed by the same two firms.

JFE Steel's practice of settling quarterly prices before the start of the quarter has so far worked well for the company in a strengthening market. And recent supply tightness in Australia suggests the steel producer could continue to reap benefits.

"Higher prices are likely to remain from January to February next year," a Japanese steelmaker said. "But prices will become more difficult to predict after the Chinese lunar new year holidays, and they might go down."

The settlement price could be seen as lower than that for premium hard coking coal, especially given the recent uptick in spot premium hard coking coal prices, other market participants said.

"The settlement price seems high if you are looking at the spot price, but as a percentage of the premium hard coking coal prices the settlement is quite low in the 60-62pc range," a Korean steelmaker said.

Low-volatile PCI prices for grades such as Coppabella PCI were last assessed by Argus at $140.55/t fob Australia.

Japan's Nippon Steel settled fourth-quarter PCI contracts at $135/t fob Australia with producers Middlemount South and Peabody Energy earlier this month. The firm is expected to begin discussions for first-quarter PCI contract prices in mid-to-late February.