Japan's power firms to negotiate with Australian coal producers

Japanese utilities will start its annual negotiation with Australian coal producers next week.

The Asian benchmark thermal coal contract starting on April 1 are expected to begin next week when Xstrata's lead negotiator is expected in Japan.

The annual contract prices are set by mining major Xstrata Coal, the world's largest exporter of power-station coal, and large Japanese utilities including Tokyo Electric Power Co, Tohoku Electric Power Co Inc and Chubu Electric.

The annual negotiations often drag on for weeks, beginning with preliminary talks, which have already got going, and include meetings in both Australia and Japan.

Tohoku Electric is expected to act as lead negotiator as TEPCO is still recovering the blows dealt to its business from last year's earthquake and tsunami. Demand for coal from Japan is likely to recover this year after falling sharply since March last year, when the earthquake and tsunami damaged some coal-fired power plants and infrastructure.

With coal prices globally weaker, Xstrata and other Australian producers are likely to have to settle the 2012 contract at a price below the record of $130 per tonne set last year, market sources said, with most expecting the final settlement price to be in the $115-$120 per tonne range.

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