Macarthur in Talks for First China Coal Sales Accords

By Jesse Riseborough

July 27 (Bloomberg) -- Macarthur Coal Ltd., the world’s biggest exporter of pulverized coal, is in talks to sign its first long-term sales contracts with steel mills in China as demand surges for the raw material.

“We’ve started to have some preliminary discussions in that regard,” Ian McAleese, executive manager of corporate development for the Brisbane-based company, said today by phone from the city. “We haven’t signed up anything yet, but that’s a very good start for us.”

Record demand for coking coal imports last month from mills in China, the world’s biggest steelmaker, is driving a “positive outlook,” Macquarie Group Ltd. said today in a report. Macarthur today reported a 21 percent jump in fourth- quarter sales to a record, citing an increase in shipments to new customers on the cash market.

“China has become the predominant driver of the metallurgical coal market,” Macquarie analysts led by London- based Jim Lennon said today. The nation took 35 percent of Australia’s coking coal exports in May compared with 1 percent of exports in 2008, it said. Imports in June were up 73 percent from a year earlier, Macquarie said.

Macarthur fell 1.9 percent to A$7.57 on the Australian stock exchange at the 4:10 p.m. Sydney close. The company is making spot sales to China at similar prices to the current benchmark price for pulverized coal of about $90 a ton, McAleese said today.

‘Soak-Up’

“The non-traditional buyers, and you can probably read there pre-dominantly China, have soaked up an awful lot of excess capacity or supply out of the industry,” he said. “That’s left the industry in pretty good shape going forward. If the Chinese hadn’t bought this metallurgical coal, there would’ve been stock sitting around everywhere and we would’ve been probably in strife still.”

Macarthur will seek to match its 2009 full-year sales of 4.6 million tons in fiscal 2010, McAleese said. He reaffirmed last month’s profit forecast of between A$155 million and A$170 million for the year ended June 30. Profit in 2010 will be lower after a 63 percent cut in this year’s benchmark price, he said.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net