June 1 (Bloomberg) -- JFE Holdings Inc., Japan’s second- largest steelmaker, and two rivals agreed to a 12.5 percent price increase for coking coal contracts with BHP Billiton Ltd., three people with knowledge of the agreements said.

Prices for the steelmaking ingredient will rise to $225 a metric ton for the July quarter, from $200 a ton for the three months started April 1, said a person at JFE who asked not to be identified because the information hasn’t been made public. Two other Japanese steelmakers also agreed to the increase, two people with knowledge of the agreements said, declining to name the companies or be identified.

Coking coal will be in tight supply globally this year as imports by China, where domestic production can’t meet demand, may reach the second-highest on record, Citigroup Inc. said April 22. Prices may reach $300 a ton in the second half, equaling a record set in 2008, the bank said in the same month.

“The price rise for BHP Billiton is in line with our expectations,” Lyndon Fagan, a Royal Bank of Scotland Group Plc analyst, said by phone in Sydney. “Coking coal is looking like one of the strongest commodity markets.”

BHP Billiton, the world’s largest mining company, fell 0.1 percent to A$38.19 in Sydney trading. JFE gained 0.3 percent to 3,075 yen in Tokyo.

Mitsubishi Alliance

BHP Billiton Mitsubishi Alliance, the biggest exporter of coking coal, asked for a 12.5 percent price increase for the July quarter, Sumitomo Metal Industries Ltd. said last week. The alliance is a venture between BHP and Tokyo-based Mitsubishi Corp, and is operated by the Melbourne-based mining company.

Amanda Buckley, a spokeswoman for BHP, declined to comment. Hayato Uchida, a spokesman for Nippon Steel Corp., declined to comment. Toshifumi Matsui, a spokesman for Sumitomo Metal, declined to comment. Nippon Steel, JFE Holdings and Sumitomo Metal are Japan’s three largest steelmakers.

BHP Billiton this year abandoned the practice of setting annual benchmark price contracts for coking coal and iron ore, and pushed steelmakers to accept quarterly contracts.

The Nikkei newspaper reported today that Japanese steelmakers agreed to the price increase without identifying the companies.

--With assistance from Yasumasa Song in Tokyo Editors: Tan Hwee Ann, Keith Gosman.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Elisabeth Behrmann at Ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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