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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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Saturday, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
A shift in imports from Asia to Europe led to significant volatility in liquefied natural gas shipping last year, prompting industry experts to urg ...
Friday, 17 March 23
INDONESIAN COAL PRICE REFERENCE UP AROUND 2.17% IN MARCH 2023
COALspot.com: Indonesian Coal Price Reference up around 2.17% in March 2023.
According to the new HBA regulation No. 41.K/MB.0 ...
Saturday, 11 March 23
MARKET INSIGHT - INTERMODAL
Uncertainty over the recovery of Chinese demand, demand destruction in Europe, as well as weather conditions will pivot the LNG market this summer. ...
Wednesday, 08 March 23
INDONESIAN COAL REFERENCE PRICE FORMULA HAS OFFICIALLY CHANGED
Indonesian Minister of Energy and Mineral Resources has officially changed the guideline for determining the benchmark price for the sale of coal c ...
Thursday, 02 March 23
INDIA'S SEABORNE CRUDE OIL IMPORTS IN 2022 INCREASED BY 11.5% YOY - BANCHERO COSTA
2022 has turned out to be a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession, Banchero Costa ...
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- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- Eastern Coal Council - USA
- Global Business Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Electricity Generating Authority of Thailand
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Ind-Barath Power Infra Limited - India
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Kapuas Tunggal Persada - Indonesia
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Rio Tinto Coal - Australia
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- Indonesian Coal Mining Association
- MS Steel International - UAE
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Merrill Lynch Commodities Europe
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- Bhatia International Limited - India
- Leighton Contractors Pty Ltd - Australia
- PowerSource Philippines DevCo
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Economic Council, Georgia
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- SMG Consultants - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PTC India Limited - India
- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Anglo American - United Kingdom
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Romanian Commodities Exchange
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Gujarat Mineral Development Corp Ltd - India
- Pendopo Energi Batubara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Indika Energy - Indonesia
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Minerals Council of Australia
- Latin American Coal - Colombia
- Kumho Petrochemical, South Korea
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Singapore Mercantile Exchange
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- McConnell Dowell - Australia
- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- Videocon Industries ltd - India
- Posco Energy - South Korea
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Ambuja Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Baramulti Group, Indonesia
- Power Finance Corporation Ltd., India
- Port Waratah Coal Services - Australia
- ICICI Bank Limited - India
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Central Electricity Authority - India
- Aditya Birla Group - India
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
- Energy Development Corp, Philippines
- Planning Commission, India
- Mercuria Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Xindia Steels Limited - India
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
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