BHP Billiton has asked major Japanese steelmakers to accept a change in the pricing mechanism for coking coal to one linked to market prices. According to The Nikkei, under the existing arrangement, prices are negotiated once a year. BHP Billiton is seeking the change so that it will be able to easily pass on increases in market prices. But Japanese steelmakers are expected to resist because it will likely exacerbate the impact of price fluctuations on their business. BHP Billiton had made a similar request on the pricing mechanism for iron ore, to which steelmakers had objected.

The world’s largest mining company is said to be seeking to shift to a new pricing system starting in fiscal 2010, which ends March 31, 2011, along with the new pricing arrangement for iron ore. The new system for coking coal is expected to take into account spot prices in China, as well as steel demand in Japan and other parts of Asia. BHP Billiton has also reportedly asked some steelmakers to agree to a quarterly pricing regime. As demand for natural resources strengthens around the world, mining companies are now in a better negotiating position with regard to steelmakers. BHP Billiton, in particular, has held the upper hand over Japanese steelmakers in recent years because its supplies account for 20% of iron ore imports and roughly half the demand for high-quality coking coal in Japan.

BHP Billiton is believed to have put the requests to Nippon Steel Corp., Sumitomo Metal Industries Ltd., and Kobe Steel Ltd. as well as major steelmakers in South Korea and India.