Nov. 20 (Bloomberg) -- South Korean utilities abandoned talks to buy coal from China this year after failing to agree on prices, said three officials involved in the discussions.

The utilities have instead increased purchases from South Africa and Russia, paying higher transport costs, since the last annual contract for shipments from China ended in July, said the officials, asking not to be identified because of company rules. The buyers, led by Korea East-West Power Co., have asked China for talks to resume supplies in April.

Coal producers in China, the world's fastest-growing major economy, are charging more for coal as prices for the fuel rise to records. The nation became a net importer of coal for the first time in January, prompting the government to impose a 5 percent levy on exports of the fuel in October to ensure domestic supplies.

``China relies on coal for about 70 percent of its electricity consumption and its coal demand will increase over the years with the economy growing at 11 percent,'' said Donovan Huang, a Hong Kong-based coal analyst at Nomura Securities Co. ``There is still more upside for coal prices, supply is very tight and there is a shortage globally.''

South Korean utilities last month offered to match the $67.90 a metric ton price paid by Japanese buyers. Chinese suppliers rejected that offer for supplies between August 2007 and July 2008 as too low, the officials said.

Jiang Chun, secretary of the general office at China National Coal Group, the nation's second-biggest coal supplier by sales that is leading the talks, declined to comment when reached by phone in Beijing.

Domestic Prices

Prices of coal at Qinghuangdao, the nation's biggest port for the fuel, rose to a record 653.46 yuan ($88.02) a ton this month.

Japan and South Korea prefer to import coal from China because shorter distances make it cheaper to ship compared with Australia or Indonesia, the world's two biggest exporters of thermal coal. The hiring rate for a capesize, a vessel that can transport 175,000 tons of coal, reached a record $194,115 a day on Nov. 15.

South Korea agreed to buy 6 million tons of thermal coal from China at $52.1 a ton under contracts that ended in July. Chinese suppliers delivered half of that volume as they waited to conclude prices for the new contracts, the officials said.

Korean utilities have been buying coal in the spot market from Australia, Indonesia, Russia, Canada and South Africa.

Spot Shipments

Korea Western Power Co., a unit of state-run utility Korea Electric Power Corp., bought 1 million tons of coal from Australia, Indonesia and Russia for delivery next year, a trader involved in the transactions said Nov. 13. In August, it bought 1.5 million tons of Indonesian, Russian and South African coal for delivery starting last month until the end of 2008.

Korea East-West Power Co. bought 120,000 tons of coal from South Africa for the first time, a company official said Aug. 1. The supplies were delivered in September. Korea Southern Power Co. bought 520,000 tons of coal originating from South Africa, Canada and Indonesia for October to March 2008, a company official said Sept. 6.

Japan paid $52.97 a ton for contracted coal shipments that ended in March. Asia's second-biggest energy user agreed in May to a 28 percent increase for 5 million tons for the year that started April 1, according to the Coal World Web site, which is co-sponsored by the China Council for the Promotion of International Trade and the China Coal Transportation and Distribution Association.

Record Prices

Benchmark coal prices in Asia have risen 64 percent this year. Surging demand in developing nations, inadequate port and rail facilities in Australia and bad weather in Indonesia that resulted in mines missing contracted shipments pushed prices to a record for four consecutive weeks.

Power station coal from Australia's Newcastle port for delivery within the next three months gained 97 cents, or 1.2 percent, to a record $84.48 a metric ton in the week ended Nov. 16, according to the globalCOAL NEWC Index, an Asian benchmark calculated each Friday.

China imported 44 percent more coal to 42.34 million tons of coal in the first 10 months of this year, the nation's customs said Nov. 15. Exports dropped 17.6 percent to 43.26 million tons in the same period.

To contact the reporter on this story: Michele Batchelor in Singapore at mbatchelor@bloomberg.net

Last Updated: November 20, 2007 00:17 EST