Xstrata in thermal coal deal with Tepco

A January-December 2014 term contract has been signed between mining giant Xstrata and Japanese company Tokyo Electric Power Co., or Tepco. Tepco will purchase Australian thermal coal from Xstrata at US$ 87/t FOB, according to two Japanese sources.

The agreed price is higher than the October 2013 – September 2014 term settlement of US$ 85.8/t FOB. Japanese coal buyers sign term contracts on a quarterly basis for every 12 months.

One Japanese source has said that other Japanese power utilities are now in negotiations with Xstrata to settle their term contract price for the January-December 2014 period. The utilities are hoping to finalise negotiations before Christmas, according to the source, since Japanese offices will be closed from December 28 and the majority of employees will return to work on January 6.

The settled price may affect certain north Asian power utilities that take the Japanese benchmark prices into consideration when negotiating their annual prices for their term contracts.

Tepco is responsible for the procurement of coal for the earthquake-hit 2000 MW Haramachi coal-fired power plant of Tohuku Electric in northeast Japan, which restarted fully in April 2013. Tepco has rights to half of the output in fiscal 2013-2014.

The company also has new coal-fired power units scheduled for commercial operation in December. These units are the 1000 MW Hitachinaka no. 2 unit and the 600 MW Hirono no. 6 unit. It began test runs at these coal-fired power units in April.

Japanese coal use has been increasing this year, according to data released by the Federation of Electric Power Companies (FERC).

Coal demand in the country rose 25.8% to a record 4.78 million t in October 2013. Tepco has been a significant player in this shift as it reduces its consumption of crude and fuel oil.

Read the article online at: https://www.worldcoal.com/power/20122013/xstrata_in_thermal_coal_deal_with_tepco_371/