Reuters reported that Xstrata Plc and Tohoku Electric Power Co have settled a coal supply contract for the year beginning October 1 at just under USD 97 per tonne.

Sources told Reuters that the negotiations are held between a lead Japanese utility, in this case Tohoku, which negotiates on behalf of other Japanese utilities.

Tohoku agreed to buy Australian thermal coal from Xstrata at USD 96.90 per tonne, a level which will likely be followed by Japan's other utilities, according to market sources with knowledge of the negotiations.

The settlement price is over USD 10 per tonne more than the Australian thermal coal price benchmark, which closed at USD 85.10 per tonne on Thursday.

The October contract price is around 12% over the spot price.

While long term contract prices are typically a few dollars above Australian coal spot prices, a premium usually explained by security of supply, the spread between the spot price and the contract price has been widening since the March 2011 Fukushima nuclear crisis.

Source - Reuters

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