Perth (Platts)--21Nov2012/421 am EST/921 GMT

Japanese utilities Kansai Electric Power and Kyushu Electric Power have signed a joint supply deal with US-based coal distributor Oxbow to import 1 million mt of low sulfur US thermal coal, market sources in Japan said Wednesday.

The two utilities released details of their joint deal in a Japanese language media statement that was translated for Platts by local market sources.

"The purchased quantity will be approximately 1 million mt and delivery will start from this month," said a market source, quoting from the joint media statement issued by Kansai and Kyushu. The companies supply electricity across western Japan including Kyushu island.

"Joint procurement will give both Japanese utilities the flexibility of delivery on the contract side," a translation of the statement said.

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Sources in the Asian seaborne coal market said the US coal supply deal could signal an attempt by the two companies to diversify their supply sources, as they presently rely heavily on Australian and Indonesian coal.

Japanese power generators have been under pressure to reduce the cost of their coal supply agreements, sources familiar with the Japanese market for imported coal said.

Osaka-based Kansai Electric posted an operating loss of Yen 116.8 billion ($1.47 billion) for the six months to September 30, compared with a profit of Yen 20.49 billion for the same period a year earlier, Platts reported earlier.

Japan's power generation from fossil fuels has risen steeply in the wake of the Fukushima nuclear accident in March 2011, with most of the country's nuclear plants still sidelined for safety checks.

A Capesize ship carrying US coal was fixed to sail from Baltimore to Oita port on Japan's Kyushu island in October at a freight rate of $24.75/mt, which market sources speculated at the time might have been a trial cargo for Kyushu. Utilities use trial cargoes to test the quality of new sources of coal to determine if it is compatible with the specifications of their power station boilers.

Florida-headquartered Oxbow markets a range of energy products including thermal and metallurgical coal, natural gas and petroleum, and posts annual sales of about $4 billion, according to its website.

Oxbow owns the Elk Creek mine in the US state of Colorado that supplies 5 million short mt/year of low sulfur, high energy thermal coal to US power utilities, and the company supplies a total 8 million short mt/year of thermal coal to US and international customers.

Platts contacted Oxbow in the US, but no one was immediately available to comment.

--Mike Cooper, michael_cooper@platts.com --Edited by Wendy Wells, wendy_wells@platts.com

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