Coal industry consultant Gerard McCloskey, who is chairing a coal conference in Sydney, told Reuters the deal was agreed with a major South American steel maker.

The news followed an unofficial Bloomberg survey ahead of the same conference that suggested prices for coking coal could average US$100 a ton.

A group of eight analysts and investors in Sydney yesterday told Bloomberg BHP Billiton could lift 2005 contract prices by as much as 79% as buyers such like Nippon Steel compete for limited supplies. BHP Billiton supplies 30% of the world's coking coal exports

McCloskey said the settlement between Xstrata and the South American firm was seen as a floor price heading into the next round of talks with the Japanese.

Bloomberg said figures from the Australian government indicated world trade in coking coal was expected to rise 2% to 219.3 million tons in 2005. BHP Billiton forecasts global trade in coking coal could rise 50% by 2010. The company has plans to almost double coking coal output to 100 million tons a year by then.

Meanwhile, the annual coking coal price negotiations kicked off in the Japanese market this week with the market anticipating an increase of at least 40% from the Japanese steel mills.

BHP Billiton-Mitsubishi Alliance (BMA) and Elk Valley Coal were in Japan this week to settle coal prices for 2005, among a contingent of several suppliers scheduled to visit Japan this week to hold talks with the Japanese steel mills.

Some reports have indicated a handful of Australian exporters are seeking a price of more than $US130 a tonne.

The Age newspaper quoted a broker as saying if a $US130 a tonne price were to prevail, BHP's profit net profit would rise by $US500 million, or 8.5% while the impact on Rio's 2005 profit would be a gain of $US200 million, or 6%.