Glencore Said to Sell Year’s Coal to Tohoku 11% Below Last Year

Glencore Xstrata Plc (GLEN), the world’s biggest exporter of thermal coal, settled a benchmark annual supply contract starting today with Tohoku Electric Power Co. (9506) at 11 percent below last year’s deal, according to a person with knowledge of negotiations.

The two companies agreed to a price of $85.80 a metric ton, said the person, who asked not to be identified because the information is private. That’s down from the October 2012 settlement of $96.90 a ton, according to the person. Fumihiro Hichiwa, a spokesman at the Sendai-based utility, confirmed the company had settled the contract, declining to comment on the price. Francis de Rosa, a Glencore Xstrata spokesman in Sydney, also declined to comment.

Japan’s regional utilities consumed a record volume of coal in August as the shut down of all the country’s nuclear reactors for safety tests forces them to rely on thermal power generation. Australian coal prices have slumped 7 percent from a year ago to $78.30 a ton as of Sept. 27, according to data from IHS McCloskey. Power generators including Tokyo Electric Power Co. (9501), the nation’s largest, typically follow the benchmark price set in Glencore Xstrata contracts.

About 27 percent of Tohoku Electric’s coal procurement in the year ended March was supplied under contracts starting October, the utility said in a report submitted to the Ministry of Economy, Trade and Industry in March. Xstrata Plc and Tohoku Electric agreed on a separate thermal coal contract starting April 1 at $95 a ton, the lowest settlement price since 2009, two people with knowledge of the deal said in April.

Japan’s 10 regional utilities used about 5.7 million tons of coal in August, up 21 percent from a year earlier, data from the Federation of Electric Power Cos showed Sept. 13.

The Asian nation imported 114.8 million tons from Australia, or 62 percent of the total, in 2012, according to data from the Ministry of Finance. Indonesia accounted for 19.5 percent and Russia 6.7 percent, according to the data.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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