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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, 03 February 10
INDONESIA BUKIT ASAM SEES DOUBLE DIGIT 2010 REV GROWTH
* 2009 net profit rose an estimated 50 pct
* Sees opportunities for overseas acquisitions
Indonesian state-owned coal miner Bukit Asam saw 2009 ...
Wednesday, 03 February 10
RECOVERY IN INDONESIAN MINING SECTOR EXPECTED TO BOOST SALES, UNITED TRACTORS SAYS
PT United Tractors, the country’s biggest supplier of heavy equipment, said on Tuesday that it expected sales to increase 15 percent this year ...
Tuesday, 02 February 10
THAI BANPU SAYS HIGHER COSTS TO HIT COAL PROFITS
Thailand's top coal miner, expects profits from its coal business in 2010 to be lower than last year due to higher costs, but its chief executive i ...
Monday, 01 February 10
CIL PLANS TO INVEST IN OVERSEAS COAL MINES
Over the next 10 years, CIL expects to import from these mines at least 500 million tonnes of thermal coal, a variety used by power plants
The bo ...
Sunday, 31 January 10
AUSTRALIA NEWCASTLE THERMAL COAL FALLS 0.7 PERCENT TO $ 98.53
Power-station coal prices at Australia’s Newcastle port, a benchmark for Asia, declined 0.7 percent, falling for the first time in four weeks. ...
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- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- Cement Manufacturers Association - India
- Directorate General of MIneral and Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Ministry of Mines - Canada
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Romanian Commodities Exchange
- Ministry of Transport, Egypt
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
- Meralco Power Generation, Philippines
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Thai Mozambique Logistica
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Parliament of New Zealand
- Global Business Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Therma Luzon, Inc, Philippines
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- South Luzon Thermal Energy Corporation
- GVK Power & Infra Limited - India
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- Indika Energy - Indonesia
- Riau Bara Harum - Indonesia
- Intertek Mineral Services - Indonesia
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Baramulti Group, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- The State Trading Corporation of India Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Latin American Coal - Colombia
- Kalimantan Lumbung Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Ambuja Cements Ltd - India
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Leighton Contractors Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Vijayanagar Sugar Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Commonwealth Bank - Australia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Agrawal Coal Company - India
- Bhatia International Limited - India
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Xindia Steels Limited - India
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Mercator Lines Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- Sindya Power Generating Company Private Ltd
- Indonesian Coal Mining Association
- Kobexindo Tractors - Indoneisa
- Petron Corporation, Philippines
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- Dalmia Cement Bharat India
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Antam Resourcindo - Indonesia
- Metalloyd Limited - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- Banpu Public Company Limited - Thailand
- Sinarmas Energy and Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
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