PRICE DIFFERENCES HOLD UP CONTRACTS WITH SIDERBRAS

PRICE DIFFERENCES HOLD UP CONTRACTS WITH SIDERBRAS

Disagreement on price will keep a group of U.S. coking coal exporters from signing contracts with their second-best customer, Brazilian steelmaker Siderbras, before the beginning of the new contract year, April 1.

Siderbras said it has reached an agreement with Pittston Co., which missed some shipments while being struck by union employees, and has a tentative settlement with Drummond Co.U.S. sources involved in the trade said Siderbras also reached an agreement with BP Coal USA Inc. in an unusual deal under which BP would ship Appalachian coal through the Gulf of Mexico rather than rail it to a loading terminal on the East Coast. BP could not be reached for comment.

But Siderbras and U.S. sources said the steelmaker has not yet covered a major portion of its U.S. tonnage that is supplied under long-standing business ties with U.S. Steel Mining Co., United Coal Co., A.T. Massey Coal Co., Jno. McCall Coal Co. and Island Creek Corp.

Siderbras normally purchases about 5.5 million tons of U.S. coking coal each year. It's offering a price hike of about $1.75 a ton on coal selling in the low $50s a ton f.o.b. U.S. port, but the U.S. producers are balking, arguing they can get increases of more than $2 a ton elsewhere in the market.

Siderbras and U.S. sources said the April 1 deadline is largely symbolic. While agreements traditionally have been reached before the beginning of the contract year, the deadline has slipped before and provisional prices were set.

One U.S. producer noted that Siderbras took a full schedule of shipments in the first quarter and is not scheduled for much tonnage in April.

But two U.S. suppliers noted that if Siderbras doesn't settle soon, it's in danger of coming up short on the coal it needs from the United States.

One of the suppliers explained that after April 1, other potential customers, put on hold during Brazilian negotiations, expect to be able to find out what tonnage will be available to them.

The risk to U.S. companies holding out for higher prices is that Siderbras will arrange to take more tonnage from Canada, Australia and Poland, sources noted.

Sources said BP has agreed to ship 150,000 tons, with an optional 50,000 tons, to Siderbras from the Gulf. Normally, companies supplying Alabama coal have been the only ones to ship to Brazil from the Gulf.