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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, 22 December 09
CHINA CONTRACTED COAL PRICE FOR 2010 SEES SLIGHT INCREASE
A number of coal and power enterprises have concluded their annual power-coal supply contracts for 2010, and the contracted coal price saw slight in ...
Tuesday, 22 December 09
NEWCASTLE COAL SHIP QUEUE LONGEST IN TWO YEARS AS EXPORTS SLOW
Bloomberg reported that, the queue of coal ships waiting at Australia’s Newcastle port, the world’s biggest export harbor for the fuel, ...
Monday, 21 December 09
INDONESIA HAS EXPORTED AROUND 195.303 MILLION TONS OF COAL TILL END OF NOVEMBER 2009
COALspot.com (Indonesia): China has been the largest single buyer of Indonesian coal in November 2009, by taking 28.69% of total exported quan ...
Monday, 21 December 09
RUSSIAN COAL MINER SUEK EYES '10 LONDON IPO
* Company valued at around $8-$9 bln - banking source
* IPO could take place in H1 - source
* May list 25 pct of share capital - report
Reuters ...
Monday, 21 December 09
IGCC OUTLOOK CHINA 2010 TO BE HELD IN APRIL 2010 IN SHANGHAI
COALspot.com (China): Press Release - Aiming at unveiling the growth area of IGCC polygeneration, IGCC Outlook China 2010 is planned to be hel ...
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- Coal and Oil Company - UAE
- PowerSource Philippines DevCo
- VISA Power Limited - India
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- Manunggal Multi Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Parry Sugars Refinery, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Parliament of New Zealand
- SMC Global Power, Philippines
- Sojitz Corporation - Japan
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Renaissance Capital - South Africa
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Star Paper Mills Limited - India
- Sarangani Energy Corporation, Philippines
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Jaiprakash Power Ventures ltd
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Dalmia Cement Bharat India
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- The State Trading Corporation of India Ltd
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Energy Development Corp, Philippines
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- ASAPP Information Group - India
- Merrill Lynch Commodities Europe
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Billiton Holdings Pty Ltd - Australia
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- Wilmar Investment Holdings
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kideco Jaya Agung - Indonesia
- McConnell Dowell - Australia
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Sidhee Cement - India
- Goldman Sachs - Singapore
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Oldendorff Carriers - Singapore
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- IEA Clean Coal Centre - UK
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- PTC India Limited - India
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Energy Link Ltd, New Zealand
- Maheswari Brothers Coal Limited - India
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Sakthi Sugars Limited - India
- IHS Mccloskey Coal Group - USA
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Uttam Galva Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Ministry of Mines - Canada
- Coastal Gujarat Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Port Waratah Coal Services - Australia
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
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