Tepco, Glencore set coal contract on spot-linked price-sources

TOKYO, July 14 (Reuters) - Tokyo Electric Power (Tepco) will buy Australian thermal coal from Glencore Plc (Xetra: A1JAGV - news) this year at prices based on the spot index, industry sources said, enabling Japan's biggest utility to benefit from weak prices for the resource.

Under an annual supply contract agreed by the two companies, Tepco will pay a premium of about $2-$3 a tonne to the globalCOAL price at Australia's Newcastle port, the sources said. The contract period began on July 1.

Given the benchmark price is now at about $70, the near-term price would be about $72-$73, roughly 20 percent lower from last year's fixed price of $89.95.

Australia is the biggest supplier to Japan, accounting for 73 percent of Japan's thermal coal imports last year. The price level will likely be followed by other Japanese utilities as Tepco is regarded as the lead negotiator. Glencore is the largest thermal coal exporter from Australia.

A Tepco spokesman declined to comment. Glencore did not immediately respond to an emailed query.

Australian coal prices have fallen more than 45 percent from a high of around $130 per tonne in 2011 as weakening demand, especially from top coal consumer China, and global oversupply of the fuel have weighed on prices. (Reporting by Osamu Tsukimori; Editing by Muralikumar Anantharaman)