It can be argued that ASIC and the ASX are allowing the likes of BHP Billiton and Rio Tinto to trade in an uninformed market because of a failure to update the market on quarterly iron ore and coal contract prices.
Since the move to quarterly pricing for more than half of our annual iron ore and coking and thermal coal exports earlier this year, the information flow from most exporting miners has ground to a halt.
The most transparent has been Wesfarmers, with its large Curragh export coking coal mine in Queensland.
On October 1, Wesfarmers updated the market on Curragh pricing:
“Price negotiations for the October 2010 to December 2010 quarter for metallurgical coal exports from Wesfarmers Resources’ Curragh mine in Queensland’s Bowen Basin have now been concluded with the majority of customers.
“As previously stated, approximately 75 per cent of Curragh’s contracted tonnage has moved to a quarterly pricing mechanism. For the October 2010 to December 2010 quarter, the weighted average US$FOB for new contract prices of Curragh metallurgical coal (hard coking, semi-hard coking and PCI) will decrease by approximately 11 per cent as compared to the July 2010 to September 2010 quarter prices.
“The Managing Director of Wesfarmers Resources, Mr Stewart Butel, said the company was satisfied with the result of its negotiations for Curragh’s hard coking coal, with price settlements for the October 2010 to December 2010 quarter at approximately US$205 per metric tonne FOB Queensland.”
Now that gives analysts and others an indication of the pricing for the industry, but BHP and other shippers have different types of coal, different product mixes and different levels of index-based contracts with customers. And, unless there’s a secret agreement somewhere, I don’t remember Wesfarmers agreeing to be the price announcer for the coal industry.
On iron ore, its even harder to get any current indication, despite BHP and Rio arguing that the move to spot prices and or indexed-based pricing (the current quarter’s price is based on an index of prices from the previous quarter) would be better for all concerned.
Vale, the big Brazilian miner, tends to make occasional unofficial statements on quarterly pricing via the local media or steel mills in Japan leak the information to Japanese news media. Together Vale, BHP and Rio control the global seaborne iron ore trade.
Wesfarmers’ Curragh mine is a price taker, even though it will ship more than 6.2 million tonnes of coal this year, generating more than $A1.3 billion in export revenues. So it is no tiddler, nor is it a giant such as BHP, Rio, Vale or Xstrata.
There is no reason why the likes of BHP, or Rio, or Macarthur Coal, or other companies that are listed exporters, can’t match the same level of disclosure.
They haven’t, especially for the current quarter when prices will be lower than they were in the September and June quarters.
Rio Tinto is due to release its third-quarter production and sales report later today.
It could include this level of detail in it for its relatively small coking coal shipments (though its listed subsidiary, Coal and Allied did not include it in its third-quarter report yesterday.
Rio did say this in its second quarter operations report released in July:
“During the quarter, agreements were signed with around 50 per cent of Asian customers for pricing on a quarterly basis reflecting the structural shift away from annual benchmark pricing. Sales are being provisionally priced to all other customers on the same basis. Third quarter iron ore prices (from 1 July) will be based on the average indexed price from March to May 2010.”
Having gone that far, it should be easy to make a quarterly statement along the lines of what Wesfarmers released on October 1.
Seeing iron ore and coal are the big drivers of our current resources boom and the $A50 billion improvement in the country’s terms of trade, there’s no reason why the rest of the country has to be kept in the dark.
ASIC and the ASX should get out of their chairs and send a please advise/explain/release note to all companies with iron ore, coking, thermal (or PCI type coal) export contracts and ask them to update the market along the lines of Wesfarmer’s statement.
And the October 1 statement was the first from Wesfarmers, similar statements were made in mid-April for the June quarter and at the end of June for the September quarter.
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