Energy Efficiency

April 7 (Bloomberg) — Posco, Asia’s third-biggest steelmaker, agreed to a tripling in benchmark contract price for coal, setting a record for the steelmaking material after floods in Australia reduced global supplies.

The Pohang, South Korea-based company will pay Australian suppliers between 205 percent and 215 percent more for some of its coking coal for the year starting April 1, Ko Min Jin, a spokeswoman, said by telephone.

The settlement indicates the price may have jumped to as much as $308.70 a metric ton, according to Bloomberg calculations.

The bigger-than expected increase, on top of record iron ore prices, will force Posco and other steelmakers to raise prices or suffer declines in profit. The floods forced at least six producers including BHP Billiton Ltd. to warn of missed deliveries from the world’s largest exporter of the fuel.

Posco lost 2,000 won, or 0.4 percent, to 515,000 won in Seoul trading today, underperforming a 0.4 percent advance in the benchmark Kospi Stock Index. Nippon Steel Corp., the world’s second-largest steelmaker, fell 3.4 percent to 512 yen in Tokyo. BHP Billiton rose 5 percent to A$40.55 in Sydney.

The coal price increases are actually higher than we expected,” Kim Gyung Jung, an analyst with Samsung Securities Co., said in Seoul.

BHP Billiton last year sold its premium coking coal products at $98 a ton. Goldman Sachs JBWere Pty. on April 4 said prices would rise to $290 a ton.

Posco needs to raise prices of its benchmark hot-rolled coil by 120,000 won ($123) a ton, or 20 percent, to cover the higher coal and iron ore costs, James Ha, an analyst with Eugene Investment & Securities Co. in Seoul, said today in a note to investors.

Iron ore prices jumped as much as 71 percent for the 12 months starting April as demand from Chinese steelmakers outpaced global supplies.

Posco sources 53 percent of its coal from Australia and the rest from Canada, China, the U.S. and other countries, according to a March 17 report by UBS AG.

To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.net; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net