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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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Thursday, 04 February 10
INDIA`S APPETITE FOR COAL EXPECTED TO RISE SHARPLY
Coal powers more than half of India's electricity plants and demand for the commodity is expected to rise sharply as the third-largest Asian econom ...
Thursday, 04 February 10
COAL PRODUCTION EXPECTED TO REACH 280 MILLION METRIC TONS - INDONESIA UPDATE
Indonesia`s coal production target for 2010 has been set at 275 million to 280 million metric tons, according to the Association of Indonesian Coal ...
Thursday, 04 February 10
MASSEY CEO 'NOT EXCITED' ABOUT PROSPECT OF QUARTERLY COAL PRICING
US coal producer Massey Energy is not in favour of switching to a quarterly pricing schedule for metallurgical coal, from the current annual price b ...
Thursday, 04 February 10
BUKIT ASAM GOES SHOPPING FOR MORE COAL MINES
State-owned coal miner PT Tambang Batubara Bukit Asam has set aside Rp 1.5 trillion ($162 million) to acquire two coal mines in East Kalimantan, pre ...
Thursday, 04 February 10
PTT EYES OVERSEAS COAL
Revenue could reachUS$600 million a year
PTT Plc, Thailand's largest energy company, aims to raise the annual revenue from its overseas coal bus ...
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Showing 6026 to 6030 news of total 6871 |
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- Asmin Koalindo Tuhup - Indonesia
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- Altura Mining Limited, Indonesia
- Kepco SPC Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parliament of New Zealand
- Marubeni Corporation - India
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Bharathi Cement Corporation - India
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
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- Planning Commission, India
- VISA Power Limited - India
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- Metalloyd Limited - United Kingdom
- The University of Queensland
- GAC Shipping (India) Pvt Ltd
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
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- San Jose City I Power Corp, Philippines
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- Medco Energi Mining Internasional
- India Bulls Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Africa Commodities Group - South Africa
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
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- Chettinad Cement Corporation Ltd - India
- Borneo Indobara - Indonesia
- Chamber of Mines of South Africa
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement - Thailand
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Central Electricity Authority - India
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- Australian Coal Association
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Ministry of Finance - Indonesia
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- Bukit Makmur.PT - Indonesia
- Sakthi Sugars Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Mercator Lines Limited - India
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- Gujarat Mineral Development Corp Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- Straits Asia Resources Limited - Singapore
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- Interocean Group of Companies - India
- Timah Investasi Mineral - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- White Energy Company Limited
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- SMG Consultants - Indonesia
- Sree Jayajothi Cements Limited - India
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Ministry of Mines - Canada
- MS Steel International - UAE
- Karaikal Port Pvt Ltd - India
- Global Business Power Corporation, Philippines
- London Commodity Brokers - England
- Deloitte Consulting - India
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- CNBM International Corporation - China
- Independent Power Producers Association of India
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- Singapore Mercantile Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Orica Mining Services - Indonesia
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Electricity Generating Authority of Thailand
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- Formosa Plastics Group - Taiwan
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Ambuja Cements Ltd - India
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- Oldendorff Carriers - Singapore
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