UPDATE 1-Taiwan, fearing squeeze, seeks long-term coal deals

(Adds details, background)

By Fayen Wong

SYDNEY, Oct 5 (Reuters) - Two Taiwanese utilities sought this week to secure coal supplies for the next five to 10 years, longer-term deals than the norm, amid growing concerns that China's demand may sap Asian supplies for years to come.

Taiwan Power Co (Taipower) and Ho-Ping Power Company issued the tenders this week to buy thermal coal from Australian, Indonesian and Chinese suppliers, producers said on Friday.

The delivery over as much as 10 years -- longer than deals typically for just four or five years -- is a stark sign of the anxiety among many Asian utilities after a year in which prices soared to record highs above $70 amid a scramble for supplies.

"The supply outlook has changed quite substantially over the past few months so we're moving to secure more coal in advance," a source at Taipower who declined to be named told Reuters.

Last month, Taipower signed a string of six to 10 years long-term contracts to buy a total of 17 million tonnes of coal from Australian, Indonesian and chinese producers.[ID:nSYD255742]

Despite a push for greener economic growth, China's massive power plant expansion is still dominated by coal-fired units.

Its unexpected emergence as a net importer this year and continued constraints on exports from number-two supplier Australia this year have forced big buyers to scramble for rare deals from further afield, primarily South Africa.

Taipower latest tender, issued on Tuesday, is seeking 500,000 tonnes of thermal coal per year beginning in 2008 and lasting from six to 10 years, sources said.

The tender was for bituminous coal with minimum calorific value of 5,500 kcal/kg on a gross as received basis, a maximum of 1.1 percent ash and not more than 10 percent sulphur, producers invited to participate in the tender said.

Ho-Ping Power, partly owned by Hong Kong's CLP Holdings (0002.HK), is also in the market seeking long-term deliveries for five years, beginning from April 2008 to March 2013, producers said. The utility is also seeking 500,000 tonnes of coal a year.

For more details click on [ID:nSYD18001]

Results of the tender will be closely watched by traders eager for signs of Indonesia and China's pricing strategies for 2008, when the supply squeeze is expected to worsen.

PRICING FOR 2008

Australian benchmark coal for the third quarter of 2008 traded at $72.60 a tonne on Friday versus $51 a tonne for prompt cargoes at the start of the year, according to trades shown on electronic platform globalCOAL.