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Tuesday, 08 December 09
VOLATILE COAL PRICES SPUR ASIAN HEDGING
 Volatile coal prices are forcing staid Asian power firms to change the way they buy fuel, setting the scene for a hedging boom as a growing array of investment banks come forward to aid the firms' first forays into coal derivatives.
A big prize awaits banks such as Goldman Sachs, Morgan Stanley and JPMorgan if they can grab a share of this business, since the utilities account for about 60% of total seaborne steam coal trade of around 600 million tonnes.
Their participation could double the Asian coal derivatives market to some 400 million tonnes over the next two years, trade sources say, although there are hurdles to overcome before Asia can match Europe, where derivatives volumes exceed physical trade by several multiples.
"We're starting to see a crack in the armour among the Japanese utilities this year and there's now hedging demand out of the sector," Geoff Clear, Head of Commodities Trading at Australia & New Zealand Bank, told Reuters.
"The coal derivatives market in Asia is in a good space and is ready to take off."
Although the first over-the-counter coal trading deals were introduced to Asia about eight years ago through globalCOAL, North Asian buyers prefer to sign long-term contracts to guarantee low prices and to secure premium quality coal.
But sharp volatility in prices, which swung between USD 50 and USD 200 a tonne last year, means this decades-old method is bringing increased risk to buyers, who can sometimes be paying far more than prevailing spot rates.
Experience has also taught utilities that purchasing coal at a fixed price does not guarantee supplies, as miners have delayed shipments when the index rises above contract prices.
"We see the market changing. Many utilities that employed very traditional ways of buying coal are now open to new hedging instruments," said Patrick Markey, Chief Operating Officer of globalCOAL Singapore, an electronic trading platform.
This year, Japanese utilities have bought about 20% of their annual coal needs, or about 26 million tonnes, through index-linked contracts and the proportion is expected to rise to around 30% in 2010, producers and traders said.
For the first time, Korea Western Power Co is also planning to buy between 10% and 20% of its annual coal requirements of 12 million tonnes through index-linked contracts next year, a utility source said.
As Asian utilities are increasingly accepting of contracts linked directly to the Newcastle price index, globalCOAL's NEWC swaps become an obvious risk-management tool to reduce most of the worry around volatility.
The size of the global coal derivatives market is hard to gauge, but brokers said it has been growing rapidly, to 1.3 billion tonnes in 2006 from an estimated 750 million tonnes in 2004.
Around 2 billion tonnes of coal derivatives are expected to be traded globally in 2009, of which the globalCOAL Newcastle market accounts for about 10%, up from just five percent two years ago -- reflecting the rapid growth potential of the Asian derivatives market.
"We are waiting for the big entrance of Japanese and Korean utilities into the swaps market," said Clear. "Some of them are still weighing up their choices, but there is now a marked change in their attitudes."
Recent participation of some Japanese trading houses in the paper market was also a sign that utilities are now open to having some risk products embedded into their traditional bilateral contracts, he added.
Some industry observers said the coal trading joint venture set up by Japan's Chubu Electric and French power provider EDF in 2007, called Chubu Energy Trading (CET), may have first paved the way for change.
While some traditional coal users were dipping their toes cautiously into the market, CET took big strides. In just two years, the unit was buying about half of Chubu's 10 million tonnes of annual coal needs through the spot market -- and managed to stay profitable in a period of wild coal price swings
Other utilities to recently step up hedging include Japan's No. 1 utility, J-Power, which has added a former Barclays commodity trader to its hedging team, and South Korea's East-West Power Co Ltd, which is looking to partner LG Corp to set up a coal trading unit.
Challenges ahead
Despite expected growth in the Asian coal trading market, trade sources say it will take some time before liquidity in the Pacific coal market catches up with its European counterpart, where the value of derivative trading exceeds the underlying market by many multiples.
"The innate conservatism of the Japanese utilities is a stumbling block," said a senior trader at an investment bank.
"The middle management is all for it. They understand how it can reduce fuel costs but have a hard time convincing their bosses, who still hold the view that hedging will introduce another risk to the equation."
A full-scale deregulation of the power markets is also needed to drive Asian utilities to search for the lowest-cost fuel.
Despite having undergone a partial deregulation, utilities in Japan and South Korea still enjoy a large degree of regional monopoly, while Taiwan's power market is still state-owned. With the freedom to pass on any fuel cost rises to users, there is no strong impetus to hedge costs.
"Many Japanese utilities are hedging now because they want a fixed price for their coal as opposed to getting the lowest price," said a trader at one of the top Japanese utilities.
Other hurdles to overcome include the establishment of a widely accepted Indonesian market index, traders and buyers said.
Although globalCOAL and Argus provide a weekly average price for different grades of Indonesian coal, market players say there are too few trades to get an accurate view of prices.
"Considering how Indonesia is the world's largest thermal coal exporter, there's definitely a need for the index to mature and to have some sort of a forward curve before utilities can use that as a hedging tool," said a trader at an investment bank.
Source: Money Control
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Wednesday, 10 February 10
JPMORGAN FORECASTS A 5.7% GROWTH IN SEABORNE IRON ORE SHIPMENTS, 3.8% FOR COAL AND GRAIN THIS YEAR
This year volumes of iron ore transportation by sea may grow to 5.7%, coal and grain up 3.8% over numbers in 2009, Ukrrudprom reports citing analyst ...
Wednesday, 10 February 10
ANGLO AMERICAN TIPS COAL PRICE RISE AFTER RAIN, AUSTRALIAN SAYS
Anglo American Plc expects coking coal contract prices to rise after weeks of heavy rain in Queensland state cut output by as much as 10 million met ...
Wednesday, 10 February 10
KANGAROO RESOURCES COMMENCES MINING AT MAMAHAK COKING COAL PROJECT
International coal producer Kangaroo Resources has kicked off mining at its second Indonesian coal operation, the Mamahak Coking Coal Project in Eas ...
Wednesday, 10 February 10
CHINA DENIES CLIVE PALMER'S COAL DEAL
ONE of China's biggest government-owned companies yesterday repudiated mining billionaire Clive Palmer for overstating what he said was Australia' ...
Tuesday, 09 February 10
INDIANS SAY SEEKING COAL BARGAINS VIA INDEX PRICES
* Indonesian cheaper than S.African - traders
* End-users wait for price falls before tendering
Indian coal traders responsible for the bulk of ...
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- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- India Bulls Power Limited - India
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Tamil Nadu electricity Board
- Kaltim Prima Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Parry Sugars Refinery, India
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Standard Chartered Bank - UAE
- Holcim Trading Pte Ltd - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Ministry of Transport, Egypt
- Rashtriya Ispat Nigam Limited - India
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Makarim & Taira - Indonesia
- Electricity Authority, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- IHS Mccloskey Coal Group - USA
- GN Power Mariveles Coal Plant, Philippines
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- Heidelberg Cement - Germany
- Commonwealth Bank - Australia
- Romanian Commodities Exchange
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- PTC India Limited - India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Xindia Steels Limited - India
- GMR Energy Limited - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Eastern Coal Council - USA
- PNOC Exploration Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Bulk Trading Sa - Switzerland
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Formosa Plastics Group - Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Orica Mining Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Toyota Tsusho Corporation, Japan
- Uttam Galva Steels Limited - India
- South Luzon Thermal Energy Corporation
- PowerSource Philippines DevCo
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Mintek Dendrill Indonesia
- Indogreen Group - Indonesia
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Port Waratah Coal Services - Australia
- SMC Global Power, Philippines
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bank of Tokyo Mitsubishi UFJ Ltd
- White Energy Company Limited
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Simpson Spence & Young - Indonesia
- Interocean Group of Companies - India
- Orica Australia Pty. Ltd.
- Malabar Cements Ltd - India
- Electricity Generating Authority of Thailand
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- Indonesian Coal Mining Association
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
- Price Waterhouse Coopers - Russia
- Eastern Energy - Thailand
- Sakthi Sugars Limited - India
- Bhushan Steel Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Thai Mozambique Logistica
- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- CIMB Investment Bank - Malaysia
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
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