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Thursday, 30 January 14
JPU SETTLEMENT PRICE AS A BENCHMARK WILL DECLINE IN IMPORTANCE BUT REMAIN RELEVANT, SAYS WOOD MACKENZIE
 JPU price will remain above spot, trending closer to spot till 2015 then increasing to 2035.
Japanese Power Utilities (JPU) are approaching a crucial negotiation period with Australian coal producers in March, when large volumes are contracted annually. Wood Mackenzie says market players can expect JPU prices to remain above market prices for the foreseeable future. As for price trends, JPUs will have to pay high premiums till 2015, before dipping from 2016 to 2020. Post-2020 to the longer term, premium over spot prices will trend upwards again. This is a result of a move away from JPU-type coal in key demand markets, which also acts to reduce the significance of JPU price as a benchmark, although not negating it altogether.
In the next few years the JPU premium over market price will remain high, settling below US$7 per tonne ($/t) by 2015. Mr Prakash Sharma, Asia Pacific Coal Market Analyst for Wood Mackenzie says, "Although global oversupply persists in the overall seaborne thermal coal market, for the highly specific JPU-type coal supply, the market will be progressively tight as other customers increase their consumption of this type of coal.”
In the medium term from 2016 to 2020, Wood Mackenzie forecasts a period where the JPU premium will decline to as low as US$3.80/t over market price as additional JPU-type supply is set to come online and producers seek to gain market share by competitively pricing their product. However, growth in demand for lower quality coal in key markets is impacting producers' product mix strategies; thus reducing the availability of JPU-type coal. This combined with a longer-term decline in JPU-type supply capacity is projected to support the premium over spot prices.
Mr Rory Simington, Coal Supply Research Analyst for Wood Mackenzie elaborates, "Fast growing demand markets of China, India and South Korea, to some degree are turning away from higher priced JPU-type low ash coal towards a more inexpensive higher ash product available on the spot market. Producers who have experienced low prices throughout 2013, and have had their margins squeezed, have reduced production costs by switching much of their incremental production towards this higher ash 5,500kcal/kg NAR market. This leaves the supply growth picture for JPU-type coal fairly flat."
Japanese power plants cannot absorb a higher ash product due to their ash disposal concerns and have only used relatively small amounts of low-ash sub-bituminous coal from Indonesia. Therefore JPUs will likely still demand predominantly JPU-type coal. However, Japan's role in the Asia Pacific coal market place will diminish as its proportion of the thermal market declines from 31% to only ten percent by 2035. Consequently, this reduces the significance of JPU price as a benchmark.
Mr Sharma says, "With the fairly flat supply growth outlook for JPU-type coal, a tighter market will result for Japanese procurement. JPUs are acutely aware of this development. Since Japan is completely reliant on coal imports, JPUs are willing to pay a premium over spot prices to lock-in the price for twelve months rather than risk supply availability by switching to index-linked pricing. This is crucial as we believe nuclear capacity in Japan will not return to pre-Fukushima levels. As such, other fuels including coal will need to play a larger role."
"Even if headlines suggest Japan is increasing imports from North America to reduce reliance on Australian producers, the negotiations are still of great importance to Japan as we do not foresee North American supply satisfying their requirements to the same extent Australian producers can." North America currently supplies two percent of Japan's thermal coal requirements. By 2025, Wood Mackenzie estimates North America will still only make up less than ten percent of Japan's thermal coal requirements.
For the longer term past 2020, Wood Mackenzie forecasts premia rising steadily again as the availability of JPU-type coal continues to decline. The margin between JPU settlement price and cost of JPU-type coal production will support the development of new projects. Therefore, JPUs will have to recognise the need to offer higher premiums in order to incentivise new supply. The steadily rising premium will reach US$5.50/t by 2027 and US$10/t in 2035 as higher cost coal projects are developed.
In summary, Mr Sharma says, "Japan recognises the need to secure supply and price stability. Therefore, JPUs favour contracts to the spot market, even at a premium. This will keep JPU pricing relevant albeit playing a diminishing role as a benchmark due to the growing market proportion of higher-ash coal in the region. In the longer term post-2020, this need will translate to JPUs having to pay higher premiums so as to incentivise Australian producers to maintain supply capacity. Hence, the JPU benchmark may lose the status of price-setter but will not likely become a price-taker even if it means that the premium will persist."
Wood Mackenzie's Editor’s notes:
JPU-type coal refers to the coal type imported by Japanese Power Utilities which is prime quality bituminous thermal coal (6322kcal/kg GAR) from Australia under term contracts.
Market prices refers to New FOB Newcastle Market Price @6000kcal/kg NAR. It is used interchangeably with the term 'spot price' in this news release.
About Wood Mackenzie
Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com
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Friday, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Semirara Mining and Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
- Wilmar Investment Holdings
- Kohat Cement Company Ltd. - Pakistan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Meenaskhi Energy Private Limited - India
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Parliament of New Zealand
- Heidelberg Cement - Germany
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Barasentosa Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Sakthi Sugars Limited - India
- Madhucon Powers Ltd - India
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- London Commodity Brokers - England
- Maheswari Brothers Coal Limited - India
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- IEA Clean Coal Centre - UK
- Neyveli Lignite Corporation Ltd, - India
- Mercuria Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- Coalindo Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- TNB Fuel Sdn Bhd - Malaysia
- Renaissance Capital - South Africa
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- TeaM Sual Corporation - Philippines
- Eastern Coal Council - USA
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- MS Steel International - UAE
- Ambuja Cements Ltd - India
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Sree Jayajothi Cements Limited - India
- Aditya Birla Group - India
- PTC India Limited - India
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Anglo American - United Kingdom
- The State Trading Corporation of India Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Sidhee Cement - India
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bahari Cakrawala Sebuku - Indonesia
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- ICICI Bank Limited - India
- Deloitte Consulting - India
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Eastern Energy - Thailand
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Bhatia International Limited - India
- Kapuas Tunggal Persada - Indonesia
- Australian Coal Association
- SMC Global Power, Philippines
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Minerals Council of Australia
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Bayan Resources Tbk. - Indonesia
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
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