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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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Thursday, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- Bhatia International Limited - India
- Parliament of New Zealand
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Sical Logistics Limited - India
- Trasteel International SA, Italy
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Sojitz Corporation - Japan
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Siam City Cement PLC, Thailand
- VISA Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mintek Dendrill Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- ASAPP Information Group - India
- White Energy Company Limited
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Link Ltd, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Mjunction Services Limited - India
- Rashtriya Ispat Nigam Limited - India
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Samtan Co., Ltd - South Korea
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- Global Coal Blending Company Limited - Australia
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- Ministry of Transport, Egypt
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- Borneo Indobara - Indonesia
- Sakthi Sugars Limited - India
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Agrawal Coal Company - India
- PTC India Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Heidelberg Cement - Germany
- Economic Council, Georgia
- Siam City Cement - Thailand
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Goldman Sachs - Singapore
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- Price Waterhouse Coopers - Russia
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dalmia Cement Bharat India
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- McConnell Dowell - Australia
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
- Thai Mozambique Logistica
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Electricity Authority, New Zealand
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- Power Finance Corporation Ltd., India
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Vedanta Resources Plc - India
- The University of Queensland
- Energy Development Corp, Philippines
- Medco Energi Mining Internasional
- Romanian Commodities Exchange
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Malabar Cements Ltd - India
- Indogreen Group - Indonesia
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Coal Association
- Planning Commission, India
- Indo Tambangraya Megah - Indonesia
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
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