BHP breaks the status quo, signs huge quarterly contract

BHP-BillitonAustralia-based BHP Billiton has broken the traditional method of signing annual contracts and has signed an unexpectedly high-priced quarterly one.

World's biggest coking coal exporter penned a deal with Japan's JFE Holdings to supply an unknown amount of coke at a price of $200/ton.

The price is 55 per cent higher than what the company had signed in 2008-09 and is much closer to spot rates which are close to $220/ton.

Besides this, the exporter has also signed contracts with other European, Indian and Chinese companies. The price quoted there is similar to the one done in Japan.

Experts believe that following BHP's footsteps, other companies will also follow and go for high priced quarterly contracts rather than going for less priced annuals.

In a statement, BHP Billiton has said that the settlements are showing the company's efforts to achieve market-clearing prices across all bulk commodities in due time.

In line are the views of commodity experts, who believe that this kind of step will help the commodity producers to charge higher prices now.

However, since it is not clear what amount of produce will be dealt with, it is expected that it would be a large one.

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