Negotiations for the 2002-03 Japanese fiscal year which began in April have been particularly protracted, reflecting a difference in opinion between Australian coal producers and their Japanese steel mill customers over the size of the price increase.

"The 12% increase is an equitable outcome reflecting both the quality of Austral's hard coking coal products and the buoyant world wide demand for coking coal generally," Austral managing director Ugo Cario said.

"Despite evidence of price differentiation by steel mills for different coal qualities based on value-in-use criteria, we are extremely pleased that Austral has secured price increases at the upper end of the average market movement for coking coal".

Austral said demand for its coal products remains strong, necessitating a reduction in volumes to some existing customers to enable the company to broaden its customer base.

Cario said the company was pleased with the outcome of the negotiations which, together with the prospect of a near doubling of production capacity at the Tahmoor mine from 2004, would underpin and enhance its profitability into the future.

Last month Austral Coal Limited reported net profit after tax of $7.31 million for the half year ended June 30 following record production of 1.23 million ROM tonnes and sales of 897,000t of clean coal.