Japan's Tokyo Electric Power Company, on Friday, is expected to finalize the January-December 2014 term price for its Australian thermal coal purchases at a higher level than the October 2013-September 2014 term settlement of $85.80/mt, on an FOB basis, Japanese market sources said Thursday.

Japanese buyers ink term contracts on a quarterly basis for every 12 months.

Tepco and supplier Xstrata are expected to finalize their negotiations for January-December on Friday, one source said. Early next week, Xstrata is expected to conclude contract prices with its other Australian thermal coal customers in Japan, he added. Tepco and the other Japanese buyers would be concluding term contracts for a total of about 1 million mt of steam coal for the January-December 2014 period.

Tepco and Xstrata could not be reached for comment at the time of publication.

One source said it will not be surprising if Tepco agreed to a higher price for January-December 2014 as spot prices for Australian Newcastle coal have recovered slightly.

Japanese power utilities are known to agree to Australian term contract prices at levels higher than prevailing spot prices, sources said. On December 18, Platts assessed the daily 90-day FOB price for Newcastle coal with a calorific value of 6,300 kcal/kg GAR at $78.70/mt.

On September 16, when Xstrata was still negotiating the October 2013-September 2014 contract with Tohoku Electric Power, Platts had assessed the daily 90-day Newcastle 6,300 kcal/kg GAR FOB price at $78.50/mt while Tohoku had agreed to a term price of $85.80/mt FOB.

Tepco was also the lead negotiator for the January-December 2013 thermal coal contract negotiations. It had chosen to link the term contract for that period at a premium to the globalCOAL Newcastle index, eschewing a single benchmark price. The premium level was not disclosed.

Tepco last based its contract price negotiations on a Newcastle coal price index for the January-December 2013 period.

Source: Platts