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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, 21 January 10
MEC IN TALKS WITH TATA POWER ON COAL - TRADE
The UAE's Middle East Coal is in talks to supply coal to Tata Power, India's biggest private sector power firm, from its new Indonesian operations ...
Wednesday, 20 January 10
NALCO SEEKS CONSULTANT FOR $4 BILLION INDONESIAN SMELTER, PLANT
National Aluminium Co., India’s second-biggest producer of the metal, called for bids for a consultant on its proposed aluminum smelter and co ...
Wednesday, 20 January 10
NTPC PLANS TO SET UP ARM FOR ACQUIRING COAL ASSETS ABROAD
NTPC, the world’s second-largest independent power producer (IPP), plans to set up a new entity for acquiring coal assets abroad to secure fue ...
Wednesday, 20 January 10
CEMENT FIRMS TO BUY POWER PLANT COAL ASH
CEBU, Philippines - Cement companies in Cebu are interested to buy the coal ash that will be produced from the coal-fired power plant in Toledo City ...
Tuesday, 19 January 10
CHINA TO INCREASE THERMAL COAL IMPORTS - WEN
China's Premier Wen Jiabao said on Tuesday that China will appropriately increase imports of thermal coal to ease the country's power shortages.
...
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- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- Bhatia International Limited - India
- Siam City Cement - Thailand
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Sojitz Corporation - Japan
- Straits Asia Resources Limited - Singapore
- Chettinad Cement Corporation Ltd - India
- Wood Mackenzie - Singapore
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- AsiaOL BioFuels Corp., Philippines
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- Chamber of Mines of South Africa
- Orica Mining Services - Indonesia
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- Therma Luzon, Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- Coal and Oil Company - UAE
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Mines - Canada
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Indonesian Coal Mining Association
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- Parliament of New Zealand
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Globalindo Alam Lestari - Indonesia
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Videocon Industries ltd - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- The Treasury - Australian Government
- Petron Corporation, Philippines
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- PTC India Limited - India
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Agrawal Coal Company - India
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Salva Resources Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- Samtan Co., Ltd - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Electricity Authority, New Zealand
- Central Java Power - Indonesia
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Malabar Cements Ltd - India
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
- Latin American Coal - Colombia
- Neyveli Lignite Corporation Ltd, - India
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Grasim Industreis Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- Africa Commodities Group - South Africa
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Planning Commission, India
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Bharathi Cement Corporation - India
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Eastern Coal Council - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GMR Energy Limited - India
- MS Steel International - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
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