UPDATE 1-Fording surges to new high on coal-price prospects

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CALGARY, Alberta, April 7 (Reuters) - Fording Canadian Coal Trust (FDG_u.TO: Quote, Profile, Research) units surged 7 percent to a new high on Monday after South Korean steelmaker POSCO (005490.KS: Quote, Profile, Research) agreed to a big rise in coking coal prices with another miner, further evidence of soaring contract values.

Fording, which owns a majority stake in Western Canada's Elk Valley Coal partnership -- the world's No. 2 exporter of metallurgical coal -- jumped C$4.10 to C$61.80 on the Toronto Stock Exchange.

Prospects for a tripling of contract coal prices and the company's weighing of strategic options, a process that may end with a sale, have lifted Fording units 61 percent this year.

Floods and transport problems in Australia have helped boost prices for coal used in steelmakers' blast furnaces.

POSCO, the world's fourth-largest steelmaker, has agreed to a 205 to 210 percent hike in coal prices with an undisclosed Australian miner from April 1, a company spokeswoman said on Monday.

Fording is still completing its contract negotiations for the year with its customers, and analysts expect increases around that same range.

"They stand to do very well this year and benefit from higher prices," Salman Partners analyst Mike Plaster said. He rates Fording a "buy" and is currently determining a new target price.

Last week, Reuters reported industry leader BHP Billiton (BHP.AX: Quote, Profile, Research) is seeking $300 a tonne for term supply of Australian coking coal for 2008-2009 supply to Japanese steel mills.