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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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Tuesday, 19 January 10
CESC TO BUY 100,000 MT OF INDONESIAN SUB BITUMINOUS COAL
COALspot.com (India): CESC, India’s one of the largest and oldest private power producer is expected to issue a closed tender any time this we ...
Tuesday, 19 January 10
COAL FOR DOMESTIC USERS
While the government is already almost a year behind schedule in issuing regulations to implement the new mining law, mineral producers have been&nb ...
Tuesday, 19 January 10
RISING DEMAND FROM POWER FIRMS TO PUSH COAL PRICES
The resurgence of the Chinese economy, along with harsh winter conditions across the country, is likely to push coal prices up in the short term. In ...
Tuesday, 19 January 10
ESSAR'S MEGA ACQUISITION PLANS
India’s Essar Group has carved a mega plan that includes a slew of acquisitions and investments in assets across various businesses. CNBC-TV18 ...
Monday, 18 January 10
INDONESIA SHIPPED 15.90 PERCENT OF TOTAL COAL EXPORTS IN 2009 TO INDIA
COALspot.com (Indonesia): Indonesia, the world largest coal exporter, exported 19.07 percent of the total coal export in 2009 to China and 15. ...
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- Lanco Infratech Ltd - India
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- McConnell Dowell - Australia
- Maharashtra Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Australian Coal Association
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Oldendorff Carriers - Singapore
- Mercator Lines Limited - India
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Indika Energy - Indonesia
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Thai Mozambique Logistica
- Vijayanagar Sugar Pvt Ltd - India
- Star Paper Mills Limited - India
- Madhucon Powers Ltd - India
- ASAPP Information Group - India
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Minerals Council of Australia
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Bhoruka Overseas - Indonesia
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Rashtriya Ispat Nigam Limited - India
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Energy Development Corp, Philippines
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- VISA Power Limited - India
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- White Energy Company Limited
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- Mintek Dendrill Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Independent Power Producers Association of India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Sindya Power Generating Company Private Ltd
- Indian Oil Corporation Limited
- Asmin Koalindo Tuhup - Indonesia
- San Jose City I Power Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Uttam Galva Steels Limited - India
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Goldman Sachs - Singapore
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Meralco Power Generation, Philippines
- TeaM Sual Corporation - Philippines
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Attock Cement Pakistan Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- Videocon Industries ltd - India
- Gujarat Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Coal and Oil Company - UAE
- Sojitz Corporation - Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Billiton Holdings Pty Ltd - Australia
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- Kepco SPC Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- The Treasury - Australian Government
- Indo Tambangraya Megah - Indonesia
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Samtan Co., Ltd - South Korea
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Directorate Of Revenue Intelligence - India
- Siam City Cement - Thailand
- SMC Global Power, Philippines
- The University of Queensland
- Price Waterhouse Coopers - Russia
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