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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, 24 December 09
DRY BULK CHARTERING - SHIPPING UPDATE
Handy
Continued firm conditions for the Handymax / Supramax market in the Atlantic despite the BSI´s downward trend. As chrs scramble to cov ...
Thursday, 24 December 09
EUROSEAS LTD. ANNOUNCES TWO-YEAR TIME CHARTER AGREEMENT FOR PANAMAX BULK CARRIER
Euroseas Ltd., an owner and operator of drybulk carriers and container vessels and provider of seaborne transportation for dry bulk and containerize ...
Wednesday, 23 December 09
INDONESIA POWER CHIEF TO BUILD PLANTS OUTSIDE JAVA
Indonesia's state electricity firm plans to build new power plants outside Java island with a combined capacity of around 2,000 megawatts to resolv ...
Wednesday, 23 December 09
BUKIT ASAM SEES CHINA COAL DEMAND BOOST
* Rebound in prices to have pushed up 2009 revs
* To more than double Tarahan port capacity
Reuters reported that, Indonesian state-owned coal m ...
Wednesday, 23 December 09
MACARTHUR COAL OFFERS TO BUY RIVAL GLOUCESTER
Queensland-based Macarthur Coal will offer to buy fellow Australian Gloucester Coal, in a move to add two new mines and increase coal resources.
...
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- Sical Logistics Limited - India
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Malabar Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Manunggal Multi Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- Bukit Asam (Persero) Tbk - Indonesia
- Minerals Council of Australia
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- San Jose City I Power Corp, Philippines
- Cement Manufacturers Association - India
- Rashtriya Ispat Nigam Limited - India
- Directorate Of Revenue Intelligence - India
- Kalimantan Lumbung Energi - Indonesia
- Indonesian Coal Mining Association
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Australian Commodity Traders Exchange
- Vizag Seaport Private Limited - India
- Parry Sugars Refinery, India
- Barasentosa Lestari - Indonesia
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Central Java Power - Indonesia
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- ASAPP Information Group - India
- Posco Energy - South Korea
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Rio Tinto Coal - Australia
- Kartika Selabumi Mining - Indonesia
- PTC India Limited - India
- Singapore Mercantile Exchange
- Planning Commission, India
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Bulk Trading Sa - Switzerland
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- Straits Asia Resources Limited - Singapore
- Salva Resources Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bukit Baiduri Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Trasteel International SA, Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Asmin Koalindo Tuhup - Indonesia
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Riau Bara Harum - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Heidelberg Cement - Germany
- Directorate General of MIneral and Coal - Indonesia
- Ambuja Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- Standard Chartered Bank - UAE
- Indian Energy Exchange, India
- VISA Power Limited - India
- The Treasury - Australian Government
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- Central Electricity Authority - India
- Meralco Power Generation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Coastal Gujarat Power Limited - India
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- The University of Queensland
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Essar Steel Hazira Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Toyota Tsusho Corporation, Japan
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Marubeni Corporation - India
- Wilmar Investment Holdings
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Mintek Dendrill Indonesia
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- Baramulti Group, Indonesia
- Ministry of Mines - Canada
- Siam City Cement - Thailand
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
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