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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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Friday, 22 January 10
JSW ENERGY TO INVEST RS 4,500 CRORE IN COAL MINES ABROAD
The Sajjan Jindal-promoted JSW Energy is planning an investment of Rs 4,500 crore (US$ 978,260,869) to acquire coal mines abroad and another of Rs 1 ...
Thursday, 21 January 10
HANDYMAX - SHORT PERIOD OWNERS IDEAS ARE AROUND MID/LOW 20S - FEARNLEYS AS
HANDY
The BSI moved in a downward direction since last Friday reflecting minor a ...
Thursday, 21 January 10
ASF GROUP TO COMMENCE COAL SALES TO CHINA BY FEBRUARY 2010
Sydney-based China energy and resource conduit, ASF Group has struck an agreement to supply coal to China.
In September 2009, ASF announced a ven ...
Thursday, 21 January 10
INDONESIA BUKIT ASAM AGREES ON LOWER COAL PRICE
Indonesian state coal miner PT Tambang Batubara Bukit Asam Tbk has agreed with a local power plant to set 2010 coal prices at 23 percent lower than ...
Thursday, 21 January 10
CABOTAGE POLICY POSTPONED
The Transportation Ministry has decided to postpone for one year the full enforcement of the cabotage principle – a maritime term for the proh ...
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- Ministry of Transport, Egypt
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Krishnapatnam Port Company Ltd. - India
- Manunggal Multi Energi - Indonesia
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Orica Australia Pty. Ltd.
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- ICICI Bank Limited - India
- Sindya Power Generating Company Private Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Essar Steel Hazira Ltd - India
- SN Aboitiz Power Inc, Philippines
- Star Paper Mills Limited - India
- SMC Global Power, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Baramulti Group, Indonesia
- Carbofer General Trading SA - India
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Port Waratah Coal Services - Australia
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- Thiess Contractors Indonesia
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Petron Corporation, Philippines
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- Mercator Lines Limited - India
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Chamber of Mines of South Africa
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Latin American Coal - Colombia
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- Gujarat Sidhee Cement - India
- Australian Coal Association
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Wood Mackenzie - Singapore
- Meralco Power Generation, Philippines
- McConnell Dowell - Australia
- Bhatia International Limited - India
- Bangladesh Power Developement Board
- Formosa Plastics Group - Taiwan
- Agrawal Coal Company - India
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- Energy Development Corp, Philippines
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Medco Energi Mining Internasional
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Africa Commodities Group - South Africa
- Edison Trading Spa - Italy
- The University of Queensland
- European Bulk Services B.V. - Netherlands
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Mjunction Services Limited - India
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Standard Chartered Bank - UAE
- Mintek Dendrill Indonesia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Meenaskhi Energy Private Limited - India
- Global Business Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Economic Council, Georgia
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Chettinad Cement Corporation Ltd - India
- IHS Mccloskey Coal Group - USA
- Trasteel International SA, Italy
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Aboitiz Power Corporation - Philippines
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