New World sees rise in coking coal prices

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New World Resources, the Czech coal miner, surprised analysts on Wednesday with an 87 per cent increase in annual coking coal prices, causing its London-listed shares to jump 22 per cent.

The Amsterdam-based company agreed with its steelmaking customers coking coal contracts at an average price of €163 a tonne for the year starting in April. This is an 87 per cent increase from the 2009 average price and a 57 per cent increase from the first-quarter price of €103 a tonne.

Demand for coking coal and iron ore – both key ingredients in steel – is booming, largely because of strong Asian demand.

But NWR serves the European steel market and sells most of its coking coal to ArcelorMittal, US Steel, and Voestalpine. The agreement indicates increased confidence among steelmakers in the developed world that industrial demand will rebound.

“The steelmakers do see bright spots on the horizon,” said Marek Jelinek, finance director.

Seaborne coking coal suppliers such as BHP Billiton are pushing the industry toward quarterly pricing, a development that is breaking down the traditional annual benchmark price.

NWR reflected this move, with 80 per cent of its coking coal production sold through annual contracts and the remaining 20 per cent sold on quarterly contracts. “There is a desire from both our side and our customers to align better with the world out there,” said Mike Salamon, executive chairman, in February. European steel demand is recovering from a low base, he said, but warned that “2010 will still be a tough year”. Colin Hamilton, commodities analyst at Macquarie, said the fundamentals in global coking coal markets were “extremely tight”.

Shares in NWR, which is majority owned by Zdenek Bakala, the Czech industrialist, rose 174p to 960p.

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