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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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Saturday, 09 January 10
THE FAR EAST MARKET STARTED TO STABILIZE - FEARNLEYS
Handy
The FEAST market started to stabilize after the quite holidays and we saw growing activity fed by Chinese coal and iron ore imports and Indi ...
Saturday, 09 January 10
IMPORTED, LOCAL COAL TO BE MIXED IN POWER DRIVE
The government is likely to create a pool price of coal, wherein imported coal and Indian coal could be mixed, making the imported coal becomes more ...
Friday, 08 January 10
SA COAL PRICES TO SPIKE ON RESUMED INDIA BUYING
South African coal prices are set for another price surge to over $100 a ton FOB as Indian and Chinese buyers compete for limited prompt supply, pro ...
Friday, 08 January 10
COLOMBIAN COAL STARTS TO MOVE TO CHINA - TRADERS
* Producer sells cape cargo Colombian coal to China
* Firm bids in freight market
* More shipments expected
Colombian coal is starting to move ...
Thursday, 07 January 10
PT. BUKIT ASAM TO BUILD NEW COAL LOADING TERMINAL AND COAL LOADER
COALspot.com (Indonesia): PT Bukit Asam (Persero) Tbk, Indonesia’s state owned coal mining company, is planning to build an additi ...
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- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Bukit Baiduri Energy - Indonesia
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Australian Coal Association
- Electricity Authority, New Zealand
- Kumho Petrochemical, South Korea
- Intertek Mineral Services - Indonesia
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Kepco SPC Power Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Sojitz Corporation - Japan
- Semirara Mining Corp, Philippines
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Deloitte Consulting - India
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- India Bulls Power Limited - India
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- New Zealand Coal & Carbon
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- Maheswari Brothers Coal Limited - India
- Cigading International Bulk Terminal - Indonesia
- Xindia Steels Limited - India
- Edison Trading Spa - Italy
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Indogreen Group - Indonesia
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- McConnell Dowell - Australia
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Samtan Co., Ltd - South Korea
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- Chamber of Mines of South Africa
- Simpson Spence & Young - Indonesia
- Sindya Power Generating Company Private Ltd
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- Antam Resourcindo - Indonesia
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Mercator Lines Limited - India
- Port Waratah Coal Services - Australia
- Mercuria Energy - Indonesia
- Posco Energy - South Korea
- SMC Global Power, Philippines
- White Energy Company Limited
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Wilmar Investment Holdings
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- Planning Commission, India
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- Parliament of New Zealand
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Wood Mackenzie - Singapore
- PTC India Limited - India
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Energy Development Corp, Philippines
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Chettinad Cement Corporation Ltd - India
- Electricity Generating Authority of Thailand
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