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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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Tuesday, 11 April 23
OIL RISES ON CHINA STIMULUS EXPECTATIONS, WEAKER DOLLAR - REUTERS
Oil prices rose on Tuesday on expectations of potential economic stimulus by China, healthy demand in the rest of Asia and a drop in U.S. crude sto ...
Sunday, 09 April 23
CHINA’S BUSINESS INCOME REBOUND POINTS TO IMPROVING ECONOMY: OFFICIAL - XINHUA
Chinese businesses have posted a strong rebound in sales revenue since the beginning of this year in the latest signal of an improving economy.
...
Sunday, 09 April 23
COAL INDIA TO BOOST SUPPLIES TO INDUSTRIES AS UTILITIES’ INVENTORIES RISE - REUTERS
Coal India Ltd will increase supplies to industries, the world’s largest coal miner said on Wednesday as fuel inventories at utilities run by ...
Thursday, 06 April 23
MARKET INSIGHT - INTERMODAL
LNG Current Supply/Demand Dynamics
This year, LNG supply will likely exceed demand, so prices will need to decline to levels that will encourag ...
Sunday, 26 March 23
EUROPE’S RUSH TO LNG COULD TURN INTO 'WORLD’S MOST EXPENSIVE AND UNNECESSARY INSURANCE POLICY'- CNBC
Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new r ...
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- Coal and Oil Company - UAE
- Ind-Barath Power Infra Limited - India
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Thai Mozambique Logistica
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Indonesian Coal Mining Association
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Ambuja Cements Ltd - India
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Ministry of Mines - Canada
- IHS Mccloskey Coal Group - USA
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Lanco Infratech Ltd - India
- The University of Queensland
- Commonwealth Bank - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- New Zealand Coal & Carbon
- Altura Mining Limited, Indonesia
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- LBH Netherlands Bv - Netherlands
- Indo Tambangraya Megah - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Antam Resourcindo - Indonesia
- Energy Development Corp, Philippines
- GMR Energy Limited - India
- Economic Council, Georgia
- Eastern Coal Council - USA
- Singapore Mercantile Exchange
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- Videocon Industries ltd - India
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- SMC Global Power, Philippines
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- Global Coal Blending Company Limited - Australia
- Sarangani Energy Corporation, Philippines
- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Interocean Group of Companies - India
- Bukit Makmur.PT - Indonesia
- Rio Tinto Coal - Australia
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- CIMB Investment Bank - Malaysia
- Bhoruka Overseas - Indonesia
- Port Waratah Coal Services - Australia
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- GAC Shipping (India) Pvt Ltd
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- ICICI Bank Limited - India
- Sree Jayajothi Cements Limited - India
- Trasteel International SA, Italy
- Star Paper Mills Limited - India
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Price Waterhouse Coopers - Russia
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Romanian Commodities Exchange
- Parliament of New Zealand
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Ministry of Finance - Indonesia
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- PetroVietnam Power Coal Import and Supply Company
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Australian Commodity Traders Exchange
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Larsen & Toubro Limited - India
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- OPG Power Generation Pvt Ltd - India
- Planning Commission, India
- MS Steel International - UAE
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Krishnapatnam Port Company Ltd. - India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Bhushan Steel Limited - India
- CNBM International Corporation - China
- Coalindo Energy - Indonesia
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Latin American Coal - Colombia
- Maheswari Brothers Coal Limited - India
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- TeaM Sual Corporation - Philippines
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- The Treasury - Australian Government
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Barasentosa Lestari - Indonesia
- Mercator Lines Limited - India
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