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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- Ministry of Finance - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Videocon Industries ltd - India
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Trasteel International SA, Italy
- Global Green Power PLC Corporation, Philippines
- Eastern Energy - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- McConnell Dowell - Australia
- Malabar Cements Ltd - India
- PowerSource Philippines DevCo
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- ASAPP Information Group - India
- Ceylon Electricity Board - Sri Lanka
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
- Independent Power Producers Association of India
- The University of Queensland
- Agrawal Coal Company - India
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Coal and Oil Company - UAE
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Romanian Commodities Exchange
- Bhushan Steel Limited - India
- SMC Global Power, Philippines
- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- European Bulk Services B.V. - Netherlands
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- SMG Consultants - Indonesia
- Directorate Of Revenue Intelligence - India
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Ministry of Mines - Canada
- Kartika Selabumi Mining - Indonesia
- Meralco Power Generation, Philippines
- Latin American Coal - Colombia
- Kumho Petrochemical, South Korea
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- IEA Clean Coal Centre - UK
- Electricity Generating Authority of Thailand
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- South Luzon Thermal Energy Corporation
- Indo Tambangraya Megah - Indonesia
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Economic Council, Georgia
- CIMB Investment Bank - Malaysia
- Interocean Group of Companies - India
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Jindal Steel & Power Ltd - India
- Minerals Council of Australia
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Ministry of Transport, Egypt
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Alfred C Toepfer International GmbH - Germany
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- Baramulti Group, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Renaissance Capital - South Africa
- Vedanta Resources Plc - India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- Commonwealth Bank - Australia
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chamber of Mines of South Africa
- Siam City Cement PLC, Thailand
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