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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
RI TO GRADUALLY STOP COAL EXPORTS
Indonesia, which over the past few years has become the world`s third largest coal exporter after Australia and China, is planning to gradually stop ...
Thursday, 04 February 10
NO AMDAL, NO COAL MINING IN KALIMANTAN: MINISTRY
To prevent further environmental damage, the government has said it would revoke the licenses of mining firms operating in Kalimantan that do not ha ...
Thursday, 04 February 10
ANTICIPATING DOMESTIC COAL DEMAND
Indonesia has an abundant amount of coal reserves, which in 2008 is estimated at 7,12 billion tones. Coal production in 2008 reached 231,18 mi ...
Wednesday, 03 February 10
CHINA'S MAIN COAL PRICES FALL AS WINTER DEMAND EASES
Weekly coal prices at China's Qinhuangdao port, a benchmark in the world's biggest producer and consumer of the fuel, fell for the first time in s ...
Wednesday, 03 February 10
NEWCASTLE COAL EXPORTS RISE 3%; SHIP QUEUE SHORTENS
Coal shipments from Australia’s Newcastle port, the world’s biggest export harbor for the fuel, increased 3 percent last week while the ...
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- Ministry of Mines - Canada
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Wilmar Investment Holdings
- Indian Oil Corporation Limited
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- India Bulls Power Limited - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Heidelberg Cement - Germany
- Antam Resourcindo - Indonesia
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Aditya Birla Group - India
- Bulk Trading Sa - Switzerland
- Bhoruka Overseas - Indonesia
- Tamil Nadu electricity Board
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- GMR Energy Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Simpson Spence & Young - Indonesia
- Central Java Power - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Kaltim Prima Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Planning Commission, India
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Sindya Power Generating Company Private Ltd
- Merrill Lynch Commodities Europe
- Mercuria Energy - Indonesia
- Larsen & Toubro Limited - India
- Karaikal Port Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Straits Asia Resources Limited - Singapore
- OPG Power Generation Pvt Ltd - India
- MS Steel International - UAE
- Dalmia Cement Bharat India
- Chettinad Cement Corporation Ltd - India
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- ASAPP Information Group - India
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Kartika Selabumi Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Australian Coal Association
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Georgia Ports Authority, United States
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Krishnapatnam Port Company Ltd. - India
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Thiess Contractors Indonesia
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Renaissance Capital - South Africa
- Therma Luzon, Inc, Philippines
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Kalimantan Lumbung Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Edison Trading Spa - Italy
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Price Waterhouse Coopers - Russia
- Bangladesh Power Developement Board
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- White Energy Company Limited
- Indian Energy Exchange, India
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- Standard Chartered Bank - UAE
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Madhucon Powers Ltd - India
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Sree Jayajothi Cements Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- TeaM Sual Corporation - Philippines
- Videocon Industries ltd - India
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Bhatia International Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Indogreen Group - Indonesia
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement - Thailand
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Goldman Sachs - Singapore
- Kumho Petrochemical, South Korea
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