Source: OsterDowJones Select
Date of Publication: December 21, 2004

(Dow Jones)--Two major Australian thermal coal exporters have settled a benchmark price for next Japanese fiscal year at US$54 a metric ton with utility Chubu Electric Power Co. (9502.TO), an analyst report issued Tuesday said.

The price is about 20% higher than the benchmark for deliveries this Japanese fiscal year ending March 31, 2005, and falls within market expectations, according to the report by Credit Suisse First Boston metals and mining analysts Peter O'Connor and Alex Mirkovic.

The price settlement was by two major producers in the Hunter Valley, namely a local coal unit of Xstrata PLC (XTA.LN) and the Warkworth mine operated by Coal & Allied Industries Ltd. (CNA.AU), a subsidiary of Rio Tinto Ltd. (RTP).

Coal prices are traditionally settled on a free-on-board basis that excludes carriage and freight.

A spokeswoman for Xstrata's Australian unit and a spokesman for Coal & Allied refused to comment on CSFB's report.

The thermal coal price settlement is the first reported for this coal type, but CSFB said it understands the tonnage covered by the settled price is only around 1.0 million metric tons.

The analyst report of the settlement comes after BHP Billiton Ltd. (BHP) earlier in December settled a 2005 coking coal price with Brazilian steel mills at US$125/ton, more than double the current price.

CSFB analysts said "bookend" prices for all coal types have now been set.

"We would reasonably expect that the intermediate coal prices should fall into line over coming days and weeks," with other price settlements wrapped up soon, they said.

Australia is the biggest exporter of seaborne coal, which is experiencing strong demand growth throughout Asia.

But coal supply is also constrained, including a shortfall in production and export limits in ports, which is helping to lift prices.

By Ray Brindal, Dow Jones Newswires, 612 6208 0902;

ray.brindal@dowjones.com

-Edited by Melanie Botts

(C) Copyright 2004 ODJ