Xstrata agrees $127.50/T CFR coal price with Japan's TEPCO

Tue Jul 5, 2011

SHANGHAI/SINGAPORE, July 5 (Reuters) - Mining giant Xstrata has agreed to sell Australian thermal coal to major buyer Tokyo Electric Power at $127.50 a tonne cost and freight from October, sources familiar with the talks said on Tuesday.

The TEPCO deal was a 24 percent hike from prices agreed in 2010, and around $2.50 less than the record April price agreement signed earlier this year.

On a freight on board (FOB) basis, the agreed price is about $2 below the current globalCOAL index price of $122.25 per tonne for Newcastle coal.

"It could be viewed as slightly bearish compared to the April agreement, but the market expected this," said a Singapore-based broker.

Both parties agreed on the pricing late last week, while Xstrata's negotiating team was in Tokyo, industry sources said.

One coal broker said he believed the contract was for 680,000 tonnes, but this could not be confirmed.

Australia's thermal coal index has been trading in a tight range near $120 a tonne for the past few weeks, but remains down nearly 7 percent so far this year after the deadly March earthquake and tsunami in Japan slashed demand in the world's largest consumer of steam coal.

Trading by Japanese and Chinese buyers is expected to remain thin until around September, when winter buying starts. (sourced Thomson Reuters)