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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, 31 December 09
YANDICOOGINA BECOMES FIRST MINE IN AUSTRALIA TO PRODUCE 50 MILLION TONNES A YEAR
COALspot.com Press Release: Rio Tinto's Yandicoogina, Australia's largest-producing iron ore mine, has broken the 50 million tonne mark for annual ...
Wednesday, 30 December 09
INDIA CEMENTS TO FINALIZE 3 SHIPMENTS OF SOUTH AFRICAN COAL NEXT WEEK
COALspot.com (India): India Cements is looking for 3 shipments (150,000MT) of South African coal for January – March 2010 delivery on C ...
Wednesday, 30 December 09
BANPU EXPECTS STABLE COAL PRICES
2009 revenue growth will be hard to beat
Banpu Plc, Asean's largest coal miner, expects coal prices to stay firm at about US$80 per tonne in the f ...
Wednesday, 30 December 09
CIL DELISTS JAGUAR ENERGY FOR KODA LINKS
Coal India Ltd (CIL) has dropped Indonesia-based Jaguar Energy & Power Ltd from the list of companies, it intended to forge partnerships with to ...
Wednesday, 30 December 09
COAL PRICE RISE REQUEST DENIED
A proposal by the Viet Nam National Coal and Mineral Industries Group to double the price of coal has been turned down by the Ministry of Industry a ...
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- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Sojitz Corporation - Japan
- Maharashtra Electricity Regulatory Commission - India
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- Sical Logistics Limited - India
- McConnell Dowell - Australia
- Mjunction Services Limited - India
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- Ministry of Mines - Canada
- India Bulls Power Limited - India
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Krishnapatnam Port Company Ltd. - India
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Globalindo Alam Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Carbofer General Trading SA - India
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- International Coal Ventures Pvt Ltd - India
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Aboitiz Power Corporation - Philippines
- Parliament of New Zealand
- Posco Energy - South Korea
- Planning Commission, India
- VISA Power Limited - India
- MS Steel International - UAE
- Thiess Contractors Indonesia
- TeaM Sual Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- Renaissance Capital - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Orica Mining Services - Indonesia
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- White Energy Company Limited
- Medco Energi Mining Internasional
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Coalindo Energy - Indonesia
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- The University of Queensland
- Tamil Nadu electricity Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Edison Trading Spa - Italy
- Mercuria Energy - Indonesia
- Agrawal Coal Company - India
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Orica Australia Pty. Ltd.
- Tata Chemicals Ltd - India
- Madhucon Powers Ltd - India
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Global Coal Blending Company Limited - Australia
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Parry Sugars Refinery, India
- PowerSource Philippines DevCo
- European Bulk Services B.V. - Netherlands
- Indian Oil Corporation Limited
- Bukit Baiduri Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Billiton Holdings Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Marubeni Corporation - India
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Rio Tinto Coal - Australia
- Standard Chartered Bank - UAE
- CNBM International Corporation - China
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