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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, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Banpu Public Company Limited - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Ambuja Cements Ltd - India
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Tamil Nadu electricity Board
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- Toyota Tsusho Corporation, Japan
- Videocon Industries ltd - India
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Global Coal Blending Company Limited - Australia
- Global Green Power PLC Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- South Luzon Thermal Energy Corporation
- GMR Energy Limited - India
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Price Waterhouse Coopers - Russia
- Energy Development Corp, Philippines
- Attock Cement Pakistan Limited
- Mjunction Services Limited - India
- Australian Coal Association
- Asmin Koalindo Tuhup - Indonesia
- International Coal Ventures Pvt Ltd - India
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- LBH Netherlands Bv - Netherlands
- Eastern Coal Council - USA
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Samtan Co., Ltd - South Korea
- Gujarat Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Thai Mozambique Logistica
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Medco Energi Mining Internasional
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Ministry of Finance - Indonesia
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Posco Energy - South Korea
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Thiess Contractors Indonesia
- Indian Oil Corporation Limited
- Leighton Contractors Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Sinarmas Energy and Mining - Indonesia
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Coalindo Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- ASAPP Information Group - India
- Bhatia International Limited - India
- Kartika Selabumi Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Altura Mining Limited, Indonesia
- Independent Power Producers Association of India
- Ind-Barath Power Infra Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Orica Australia Pty. Ltd.
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Ministry of Mines - Canada
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Wood Mackenzie - Singapore
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Electricity Authority, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- OPG Power Generation Pvt Ltd - India
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Planning Commission, India
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- White Energy Company Limited
- Metalloyd Limited - United Kingdom
- Edison Trading Spa - Italy
- Energy Link Ltd, New Zealand
- Eastern Energy - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- AsiaOL BioFuels Corp., Philippines
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
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