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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, 09 December 09
INDONESIA'S RECAPITAL TO PAY $1.48 BLN FOR BERAU
Recapital Advisors, an Indonesian investment firm, will pay $1.48 billion in cash and notes to buy coal miner PT Berau Coal, $300 million of which i ...
Wednesday, 09 December 09
COAL INDIA YET TO IMPLEMENT IMPORT LINKED PRICES
Coal India Ltd is adopting a conservative approach in pricing despite being allowed to charge import-linked price for the country's minuscule reser ...
Wednesday, 09 December 09
INDIA NEEDS TO IMPORT 29 MILLION TONNE STEAM COAL IN 2009 - 10
Mr Sriprakash Jaiswal Indian minister of state (Independent Charge) for coal informed the Rajya Sabha that Central Electricity Authority has estimat ...
Tuesday, 08 December 09
MEC TO SHIP 2M T INDONESIA COAL TO INDIA IN 2010 - REUTER'S INTERVIEW
The UAE's Middle East Coal plans to start operation of coal mines in Indonesia's East Kalimantan province next year with initial production of 2 m ...
Tuesday, 08 December 09
RICHARDS BAY COAL SHIPMENTS FELL 11% IN NOVEMBER FROM YEAR AGO
Coal exports from South Africa’s Richards Bay, site of the continent’s largest export terminal for the fuel, fell 11 percent in November ...
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- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Mjunction Services Limited - India
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Manunggal Multi Energi - Indonesia
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- Xindia Steels Limited - India
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Indian Oil Corporation Limited
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Thiess Contractors Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Directorate General of MIneral and Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- Kepco SPC Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Bhoruka Overseas - Indonesia
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Coal Blending Company Limited - Australia
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- Antam Resourcindo - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
- Jaiprakash Power Ventures ltd
- Therma Luzon, Inc, Philippines
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Agrawal Coal Company - India
- Posco Energy - South Korea
- Aditya Birla Group - India
- London Commodity Brokers - England
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- Altura Mining Limited, Indonesia
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- ICICI Bank Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Latin American Coal - Colombia
- Parliament of New Zealand
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Metalloyd Limited - United Kingdom
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- The University of Queensland
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- Central Electricity Authority - India
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Finance - Indonesia
- Binh Thuan Hamico - Vietnam
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Bukit Makmur.PT - Indonesia
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- Indika Energy - Indonesia
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- Goldman Sachs - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Planning Commission, India
- Madhucon Powers Ltd - India
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- Billiton Holdings Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- Iligan Light & Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
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