Japanese steelmakers are opposed to the Australian mining giant BHP Billiton's attempt to switch to quarterly contracts instead of annual contracts for supplying coal, as the change would not be appropriate for their clients in the manufacturing industry, press reports have stated.
On January 26, Japan Metal Daily reported that BHP Billiton was seeking a quarterly contract on coal in negotiations with Japanese steelmakers, with the current contracts of Japanese companies due to expire on March 31.
Market players state that a quarterly contract will be inconvenient for Japanese steelmakers, who supply steel products to consumers such as carmakers and shipbuilders, who for their part set sales their prices annually.
Commenting on the issue, Japan Iron and Steel Federation (JISF) chairman Shoji Muneoka said, "We have heard there is a miner who favors a shorter contract period and that some Chinese steelmakers have not rejected the idea. Chinese steelmakers produce a lot of construction steel, in which quarterly price changes are easier, but Japanese steelmakers supply 60-70 percent of their product to manufacturers, who would not like quarterly cost fluctuations. We hope the miner honors the market situation, which is different from country to country."
The benchmark system, which has been in use for 40 years, is being questioned after China rejected the miners' 2009-10 price settlement with Japan, opting to buy on the spot market.