Steel prices are poised to rise further after an Asia steelmaker yesterday agreed to a tripling in price of its supply of coking coal in a settlement that is likely to set the benchmark for the steelmaking industry.

South Korean steelmaker Posco said it had accepted a 205-210 per cent rise for its supplies from Australian miners.

Analysts said that the agreement was likely to be followed by other steelmakers in the region and in Europe, resulting in higher inflation in emerging economies.

The increase in the cost of coking coal as set by the Posco settlement was larger than the level expected by the market and the industry and comes on top of a 65-71 per cent rise in iron ore prices this year. Iron ore and coking coal are the two main expenditures for the steelmaking industry.

Analysts said that steel prices might need to rise up to 20 per cent to cover the jump in coking coal cost.

Steelmakers raised the prices of their products 10-20 per cent in February and March after the cost of iron ore went up.

Alan Heap, commodities analyst at Citigroup in Sydney, said that the coal markets had tightened further as a result of production losses in Queensland and reduced Chinese and South African exports.

China and South Africa suffered power blackouts this year and utilities in both countries are relying more on coal to increase power supply.

“We now expect coking coal contract prices to be set at $285 a tonne,” Mr Heap said. That compares with current prices of about $85 a tonne.

Spot transactions of coking coal have reached up to $375 a tonne for premium Australian coal, according to Mr Heap. He added that some steelmakers had purchased significant volumes of spot coking coal from US suppliers at very high prices, highlighting the degree of supply shortage in the industry.

The increase in coking coal prices is likely to be replicated in thermal coal for power plants, with Australian miners seeking to double the prices to about $110-$125 a tonne, according to brokers and analysts.