1999/2000 Japanese Hard Coking Coal Contracts.

MELBOURNE, Australia--(BUSINESS WIRE)--Dec. 15, 1998--The Broken Hill Proprietary Company Limited (BHP) has concluded annual price negotiations with each of the Japanese Steel Mills (JSM) for deliveries of hard coking coals from BHP-managed coal mines in the Japanese fiscal year commencing 1 April 1999.

BHP Coal Group General Manager and Chief Executive Officer, Mr R W (Bob) Kirkby said the settlement had been finalised after a series of negotiations with each of the Japanese Steel Mills.

Hard coking coal prices for the range of coals marketed by BHP will be reduced by an average of US$9 per tonne FOB on current prices, in line with other producers who have concluded their negotiations in Japan.

Mr Kirkby said the outcome reflected the difficult economic situation being experienced by the Japanese steel industry and the highly competitive nature of current world coal markets. Japan's crude steel production this year is forecast to be at its lowest level for 27 years.

Discussions with each of the steel mills indicate hard coking coal deliveries for fiscal year 1999 should be at a similar level to the current year, based on the current Japanese crude steel production rate of around 90 million tonnes per annum.

Mr Kirkby said that an intensive cost reduction program throughout BHP Coal's operations had greatly improved the cost competitiveness of all mines.

"However, BHP will now need significant further cost reductions, and in particular will be looking to the Queensland Government to play its part through lower rail freight costs, and the removal of 'super' royalty charges.

"BHP is significantly disadvantaged by discriminatory 'super' royalty charges, which do not apply to new coal producers who have entered the market in Queensland, or to overseas competitors," said Mr Kirkby.

The coal brands in the settlement are Peak Downs, Goonyella, Saraji, Gregory, Norwich Park, Blackwater and Riverside, all from Central Queensland. These mines are managed by BHP Coal on behalf of the Central Queensland Coal Associates and Gregory Joint Ventures and BHP Mitsui Coal Pty Limited.

Japan accounts for approximately 20 per cent of total annual sales of hard coking coal from the mines managed by BHP Coal. Other major markets are Europe, Korea, Taiwan, India and South America.