The latest coking coal settlement at $285/mt FOB Australia may have been a lucky case of timing for miners, according to some analysts and market participants.

Facing a downward price trend in the backdrop of weak steel prices, and as volatile financial markets rattle sentiment, the structure of steel contracts may have led buyers to settle fourth-quarter contracts early, they said. The accord comes ahead of talks to resolve a miner strike in September and as logistics in exporter Queensland improve.

The Q4 hard coking coal contract settlement at $285/mt FOB Australia--said to be done between Anglo American and South Korea's Posco--was helped by "good timing," Credit Suisse said Thursday, adding that prices are likely to fall further on supply improvements out of Queensland.

"The $285/mt is $25/mt above our Q4 expectations, largely reflecting 'good timing,'" a note from analysts led by Melinda Moore in London said Thursday.

Credit Suisse added that the new HCC benchmark contract level down 9.5% from $315/mt in Q3 and $45/mt from the record $330/mt quarterly benchmark in Q2 reflected supplies recovering from Queensland flood disruptions to mines and railways that occurred in early 2011 and the end of 2010.

"We had expected HCC prices to fall back to the Chinese domestic prices by now. However substantial amounts of Queensland port and rail maintenance across July and August have led to a slower-than-expected recovery in volumes," Credit Suisse said.

Chinese HCC spot prices are around $252/mt, it said.

The bank said it still forecasts seaborne HCC prices to drop a further $20-30/mt, down to Chinese spot prices of $250-260/mt, as loading rates further recover out of Queensland state, the biggest global supplier.

Spot prices are expected to trend down in the near term, agreed analyst Colin Hamilton at Macquarie Commodities Research. The market is still nervous and any sign of rain or disruption in Queensland, however, would send prices back above $300/mt, he warned.

An Indian steel mill source told Platts that prices were still too high and needed to come down further, based on prevailing prices for steel and coke.

Weaker global spot pricing for flat steel such as hot-rolled coil--back near 2010 levels--contrasts with coking coal and iron ore prices still trading near record contract levels.

BMA OCTOBER PRICING DUE IN NEXT DAYS

BHP Billiton-Mitsubishi Alliance is set to offer pricing for October under its monthly contracts in the next few days and this may by key for future price direction, several sources said.

Two traders forecast BMA would seek more than $285/mt FOB for its premium Peak Downs and Saraji brands, after selling September loadings of Peak Downs at about $305/mt FOB Australia. BHP Billiton, which markets the joint venture's coal supplies, is selling about half its coking coal on monthly contracts, CEO Marius Kloppers said Wednesday.

Credit Suisse added that industry practice, under the quarterly pricing system, is to allow steel mills a month to communicate changes in raw materials prices to downstream steel customers, thereby pressuring for a settlement to conclude by September.

Many iron ore price contracts use a three-month period of average historic spot prices provided by Platts and other external indexes, and the one-month lag to the quarter to be priced allows many steel mill to gage their Q4 iron ore costs by September 1.

SEMI-SOFT LIKELY UNDER $200/MT

Credit Suisse said the average HCC price for 2011 would be $291/mt FOB, up 41% from $207/mt in 2010, boosting prices and costs for steelmakers globally.

The bank said semi-soft coking coal contract prices, as usually negotiated first by the biggest producers Rio Tinto and Xstrata, may fall to $191/mt in Q4 from $212/mt in Q3. This would factor in a 67% value of the HCC benchmark as seen in Q3. This was expected too by a coal producer, who agreed prices were likely to go sub-$200, "unless Rio or Xstrata can work some magic."

The PCI settlement at $208/mt, indicating 73% of the HCC benchmark, is in line with Q3 differentials, it added.