A new pricing mechanism for metallurgical coal is set to take effect in the second quarter of 2017, according to published reports.
As a result, the previously negotiated premium Hard Coking Coal (HCC) quarterly benchmark price is being replaced by a new index-based pricing mechanism.
Quarterly prices will be based on an average of three assessments during the quarter (on a one-month delay).
While his is a historic change for the industry, the new methodology follows the path of met coal mining giant
BHP Billiton Ltd. (
NYSE: BHP,
Forum) and iron ore.
Published reports have said the move to eliminate quarterly pricing could expose metallurgical coal miners to more price volatility.
Teck Resources Ltd. (
TSX: TECK.B,
NYSE: TECK,
Forum) this week released its steeling making coal price guidance for the second quarter of 2017. The company said it now expects its second quarter average realized coal price to be between US$160 and US$165 per tonne.
The company said the second quarter price for steelmaking coal sold under quarterly contract has been established, based on an average of three assessments, which results in pricing of approximately US$290 per tonne.
It said the index pricing mechanism will apply effective, April 1, 2017, and for future quarters.