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Japan's Tohoku Electric settles some JFY 2018-19 thermal coal supply contracts

Perth — Japanese utility company Tohoku Electric Power said in a statement sent Thursday that it has settled benchmark prices for thermal coal supply contracts for the financial year 2018-2019 (April-March) with a number of Australian suppliers, without revealing any price details.

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"Regarding your inquiry, we have reached agreements with several suppliers," Tohoku Electric said in its emailed response to S&P Global Platts' questions about the progress of its talks for 2018-2019 Japanese financial year supply contracts.

Tohoku Electric went on to state: "And also we are currently in negotiations with several suppliers, too."

The power company said it was unable to disclose any price information for the commercially confidential supply agreements it has entered into with some Australian thermal coal suppliers. It also declined to name the Australian suppliers.



However, market sources said there were indications that recent price discussions for Tohoku's contracts were focused around $95/mt FOB Newcastle, 6,322 kcal/kg GAR, which is broadly equivalent to 6,000 kcal/kg NAR in terms of calorific value.

Tohoku Electric's supply contracts are for the 6,322 kcal/kg GAR grade of Australian thermal coal, shipped from Newcastle port to its power plants in Japan including Noshiro, which has two 600-MW generation units, and Haramachi plant with two 1,000 MW units.

The price agreed by Tohoku Electric with its suppliers is important for the Asia-Pacific market as it tends to be adopted by smaller buyers in the Japanese market for their thermal coal supply contracts, and by buyers in other parts of Asia, including in Taiwan and Thailand.

Though volumes covered under the Japanese financial year vary every year, usually they amount to tens of millions of tons of thermal coal.

A year ago, Tohoku Electric settled early with a number of Australian thermal coal shippers for its April 2017-March 2018 financial year supply contracts at prices of $58-$61.60/mt FOB Newcastle, but held out for longer in its negotiations with other suppliers, including Glencore.

Talks with its major supplier Glencore eventually finished in late April, with an agreement price of $84.97/mt FOB Newcastle, basis 6,322 kcal/kg GAR. It was the highest benchmark since $95/mt in 2013, sources said at the time.

Platts Northeast Asia thermal coal index, or NEAT, which is the delivered-Japan price for shipments of thermal coal on a 5,750 kcal/kg NAR and 15% ash basis slipped below $90/mt this week for the first time since September 2017, and it was assessed Thursday at $88.20/mt CFR Kinuura.

--Mike Cooper, michael.cooper@spglobal.com
--Edited by Pankti Mehta, pankti.mehta@spglobal.com