Rising Sun, plunging demand

Two Japanese steel companies have asked BHP Billiton to delay the delivery of its iron ore and coking coal, due to output cuts at the steel mills.

Two Japanese steel companies have asked BHP Billiton to delay the delivery of its iron ore and coking coal, due to output cuts at the steel mills

Nippon Steel and Kobe Steel asked the mining giant to delay shipments about a month ago when they begun reducing steel output.

“Miners understand that our stock levels are high and the stockyard is full due to production cuts,” a spokesman at Nippon Steel said.

Nippon Steel has dramatically reduced its output as Japan continues to slip into what is expected to be a deep recession.

Late last month, oil prices fell below $56 a barrel, highlighting investor fears of a global economic slowdown that will hurt crude demand.

Nippon Steel said last month it would double its planned production cuts to 12%, in response to slowing demand.

A BHP spokesperson declined to comment on whether or not the miner had agreed to the delay, however, he did say that the company would make an announcement if production levels changed.

“We recognise that this is a challenging market and if anything changes we will make an announcement in the same way we made an announcement on Samancor yesterday,” the spokesperson told MINING DAILY.

Ore that is not delivered by the end of March will be sold under a new contract price, which will be set early next year.

But coking coal will be sold at the current price even if deliveries are delayed into next business year, a Kobe Steel spokesman said.

Miners are expected to sharply cut their iron ore and coal prices next year amid slumping demand from steelmakers after nearly doubling the ore price and tripling coal price this year.

Masafumi Yasuoka, senior managing executive officer at Mitsui OSK Lines, said mills have requested the shipping company to take 35 to 36 days for a round voyage to Australia, a pace 20% slower than usual.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.