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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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Monday, 14 December 09
RICHARDS BAY COAL TO FINISH EXPANSION IN 1ST QUARTER
Richards Bay Coal Terminal, which ships more than a quarter of Europe’s energy coal, said it will complete its Phase 5 expansion project in th ...
Monday, 14 December 09
SOUTH AFRICAN STEAM COAL PRICES FIRMING UP FOR Q1 TRADE
Reuters reported that Q1 South African coal prices firmed again slightly largely on Asian demand but European delivered prices were little changed.
...
Sunday, 13 December 09
THE FREIGHT MARKET SEEMS TO BE COMING OFF A BIT AND THE MARKET MAY BE SOFT NEXT WEEK - CAPT. REDDY
COALspot.com (Singapore): "The market softened this week especially in the Cape and Panamax segment , where as the Supramax and Handy size was ...
Sunday, 13 December 09
NAPOCOR CUTS COAL IMPORT PROJECTION FOR 2010
STATE-RUN National Power Corp. slashed its planned coal importation for 2010 to only 200,000 metric tons from 3.4 million MT this year, as the gover ...
Sunday, 13 December 09
CHINESE BUYERS SEEK LARGE TONNAGE OF SOUTH AFRICA STEAM COAL
Reuters reported that Chinese utilities on the coast and inland are seeking several cape cargoes each of South African coal for 2010 delivery becaus ...
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- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Bhatia International Limited - India
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Coal and Oil Company - UAE
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Riau Bara Harum - Indonesia
- Eastern Coal Council - USA
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Indika Energy - Indonesia
- MS Steel International - UAE
- Parliament of New Zealand
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Directorate General of MIneral and Coal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- CNBM International Corporation - China
- Videocon Industries ltd - India
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Dalmia Cement Bharat India
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Kideco Jaya Agung - Indonesia
- Minerals Council of Australia
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Uttam Galva Steels Limited - India
- Gujarat Sidhee Cement - India
- GAC Shipping (India) Pvt Ltd
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Edison Trading Spa - Italy
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kepco SPC Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Kumho Petrochemical, South Korea
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Globalindo Alam Lestari - Indonesia
- Cement Manufacturers Association - India
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Simpson Spence & Young - Indonesia
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Price Waterhouse Coopers - Russia
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Interocean Group of Companies - India
- Sree Jayajothi Cements Limited - India
- Siam City Cement - Thailand
- Australian Coal Association
- Banpu Public Company Limited - Thailand
- Electricity Authority, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Kapuas Tunggal Persada - Indonesia
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Gujarat Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- Bharathi Cement Corporation - India
- Global Coal Blending Company Limited - Australia
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Therma Luzon, Inc, Philippines
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- Timah Investasi Mineral - Indoneisa
- Posco Energy - South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Trasteel International SA, Italy
- Carbofer General Trading SA - India
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Thiess Contractors Indonesia
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
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