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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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Wednesday, 30 December 09
CHINA'S 2010 COAL DEMAND COULD RISE 4%-6%, ACCORDING TO CHINA SECURITIES JOURNAL
China, which is the world’s second-largest energy user, may consume between 4 and 6% more coal next year on continued economic growth, China S ...
Tuesday, 29 December 09
PROFIT IN COAL INDUSTRY DOWN 9.4% Y-O-Y IN JAN.- NOV.
In November, China's coal production was 289mln tons, up 26.3% year on year, an increase of 5.2% over last month. China's average daily trucks loa ...
Tuesday, 29 December 09
DHARMA HENWA EYES 20% REVENUE GROWTH
Local integrated mining services provider PT Dharma Henwa, which was earlier this year acquired by coal mining giant PT Bumi Resources, expects reve ...
Monday, 28 December 09
NEED TO IMPORT COAL COMES EARLY
Viet Nam may need to start importing coal as early as 2012, three years earlier than expected, to meet its electricity demands.
The Viet Nam Coal ...
Monday, 28 December 09
GOVT EYES $3.57B MINING, GEOTHERMAL INVESTMENT
The country can expect up to US$3.57 billion in investment in mining and geothermal energy next year, which would represent an increase by more than ...
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- The Treasury - Australian Government
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Central Java Power - Indonesia
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Mercator Lines Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Energy Exchange, India
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- Uttam Galva Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Cement Manufacturers Association - India
- Jaiprakash Power Ventures ltd
- Leighton Contractors Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Xindia Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- Makarim & Taira - Indonesia
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Renaissance Capital - South Africa
- Kepco SPC Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- San Jose City I Power Corp, Philippines
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Tamil Nadu electricity Board
- Coalindo Energy - Indonesia
- Planning Commission, India
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- VISA Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Kartika Selabumi Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Ambuja Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Sojitz Corporation - Japan
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- Toyota Tsusho Corporation, Japan
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Antam Resourcindo - Indonesia
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Maheswari Brothers Coal Limited - India
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- White Energy Company Limited
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Indo Tambangraya Megah - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Port Waratah Coal Services - Australia
- The University of Queensland
- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Energy Development Corp, Philippines
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Eastern Energy - Thailand
- Interocean Group of Companies - India
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- The State Trading Corporation of India Ltd
- Minerals Council of Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Georgia Ports Authority, United States
- Marubeni Corporation - India
- Australian Coal Association
- SMG Consultants - Indonesia
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- Barasentosa Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Carbofer General Trading SA - India
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- Banpu Public Company Limited - Thailand
- Economic Council, Georgia
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- PTC India Limited - India
- Mjunction Services Limited - India
- Globalindo Alam Lestari - Indonesia
- Global Business Power Corporation, Philippines
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- ICICI Bank Limited - India
- Bhatia International Limited - India
- Central Electricity Authority - India
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Neyveli Lignite Corporation Ltd, - India
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- Lanco Infratech Ltd - India
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
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