BHP Billiton sees coking coal market well supplied in near term

MELBOURNE Tue May 28, 2013 8:02pm EDT

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MELBOURNE May 29 (Reuters) - BHP Billiton, the world's biggest coking coal exporter, said it expects the market to be "comfortably supplied" in the near term, with supply swings determined by U.S. mines and demand swings dominated by China.

"In the absence of a major supply disruption, near-term metallurgical coal prices will be range bound," the company said in slides prepared for the first analyst briefing by newly appointed coal chief Dean Dalla Valle and his team.

Dalla Valle is pulling together BHP's two coal businesses, combining energy coal, used in power plants, and coking coal, used in steel-making, and looking to strip out costs in the face of a steep decline in coal prices, higher royalties and a high Australian dollar.

He said BHP Billiton would look to sell some coal assets as part of the company's wider effort to focus only on its best mines, and would not embark on any new coal projects.

"Our plan will deliver substantial growth in free cash flow," the slides said.

The market is expected to remain well supplied as projects, such as BHP's Caval Ridge mine in Australia's Queensland state, are completed and as production that was held back due to weather or industrial disruptions returns, BHP said.

BHP said China will dominate demand in the near-term, but India and emerging countries would become increasingly important drivers further out as Chinese demand growth eases.

"China is expected to remain a significant importer, however much of China's future demand growth will be met by domestic coals," it said.

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