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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, 17 December 09
CIL TO IMPORT 4 MILLION TONNES COAL FOR NTPC
The country's largest coal miner Coal India Ltd (CIL) will import 4 million tonnes of coal for state-run power company NTPC.
"Earlier, ther ...
Wednesday, 16 December 09
COAL MARKETS 2010 CONFERENCE - PRESS RELEASE
COALspot.com (Singapore) Press Release – Back for the 8th year, Coal Markets 2010 will be taking place in Singapore on 28 – 29 Jan ...
Wednesday, 16 December 09
CHINA 2010 COAL TERM PRICES SEEN RISING 8% ON YEAR
Term prices of thermal coal for 2010 in China are expected to rise about 8 percent from this year's levels, as demand for power has been roaring ba ...
Wednesday, 16 December 09
KANGAROO RESOURCES TO ACQUIRE INDONESIAN COAL INTERESTS
Emerging coal producer Kangaroo Resources has significantly enhanced its production pipeline in Indonesia after reaching agreement to acquire a coki ...
Wednesday, 16 December 09
UAE'S RAS AL KHAIMAH TO INVEST $5.2B IN EAST KALIMANTAN PROJECT
Shrugging off neighbor Dubai’s debt problems, the smaller United Arab Emirate of Ras Al Khaimah announced on Tuesday that it would increase it ...
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- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vedanta Resources Plc - India
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- Coal and Oil Company - UAE
- Semirara Mining and Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- European Bulk Services B.V. - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- IHS Mccloskey Coal Group - USA
- IEA Clean Coal Centre - UK
- Maharashtra Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Coalindo Energy - Indonesia
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Orica Mining Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Mercator Lines Limited - India
- PTC India Limited - India
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- Timah Investasi Mineral - Indoneisa
- Barasentosa Lestari - Indonesia
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- Heidelberg Cement - Germany
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Salva Resources Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Pendopo Energi Batubara - Indonesia
- Kideco Jaya Agung - Indonesia
- Orica Australia Pty. Ltd.
- Global Green Power PLC Corporation, Philippines
- Xindia Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- OPG Power Generation Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Central Electricity Authority - India
- Mercuria Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wilmar Investment Holdings
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Planning Commission, India
- Kobexindo Tractors - Indoneisa
- Iligan Light & Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Formosa Plastics Group - Taiwan
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- Meenaskhi Energy Private Limited - India
- India Bulls Power Limited - India
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Economic Council, Georgia
- TeaM Sual Corporation - Philippines
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Georgia Ports Authority, United States
- VISA Power Limited - India
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Dalmia Cement Bharat India
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Meralco Power Generation, Philippines
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Krishnapatnam Port Company Ltd. - India
- Bangladesh Power Developement Board
- The University of Queensland
- Global Business Power Corporation, Philippines
- Indonesian Coal Mining Association
- Bhoruka Overseas - Indonesia
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Singapore Mercantile Exchange
- Semirara Mining Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
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