* Price agreed at $95/T, down $20/T from yr ago
* Deal in line with expectations
* Will set benchmark for Asia
* Japan utilities under pressure to cut costs after
PERTH/TOKYO, April 12 Australia's largest
thermal coal exporter Xstrata Plc and Japan's Tohoku
Electric Power Co have settled a benchmark annual
supply contract 17 percent lower than last year, in a victory
for cost-pressured Japanese utilities.
The first Japanese coal import contract for the financial
year beginning April 1 was set at $95 per tonne, industry
sources close to the negotiations said on Friday, down about $20
from a year earlier.
The price level, which was in line with most analyst
expectations, will likely be followed by other Japanese
utilities and will be used as a benchmark for Asia.
"It's a big compromise (for Xstrata), I think," said a
Sydney-based market source. "For suppliers, it's not a good
Annual talks, which typically finish at the end of March,
had been drawn out reflecting wide differences in the initial
offer above $100 and a bid below $95, as Xstrata faces sliding
coal prices and with Japanese utilities under pressure from
Tokyo to cut fuel costs.
Tumbling prices have hit Australian coal producers hard,
prompting layoffs and mine closures across the sector in efforts
to cut costs, which industry sources say are as much as $100 per
tonne at some mines.
Meanwhile, Japan's energy firms have been taking a tougher
line with their suppliers, with nearly all the country's nuclear
reactors offline in the wake of the Fukushima disaster.
Some sources in the industry said they believed additional
tonnage would also be offered at a discount to the headline
The settlement price represents a premium of $6.10 to the
Australian Newcastle coal index price of $88.90 a tonne, partly
due to the higher quality of coal demanded by Japanese
utilities, but the premium shrank from more than $8 a year ago.