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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, 08 December 09
HIGH GLOBAL COAL PRICES HIT POWER PROJECTS
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Monday, 07 December 09
VEDANTA RESOURCES ISSUES TENDER TO IMPORT 2.25 MILLION COAL
COALspot.com (India): Vedanta Resources plc is a London stock exchange listed FTSE 100 diversified metals and mining major with revenues in excess o ...
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- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IHS Mccloskey Coal Group - USA
- Kepco SPC Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Kartika Selabumi Mining - Indonesia
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- Minerals Council of Australia
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- CNBM International Corporation - China
- SMC Global Power, Philippines
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- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
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- Essar Steel Hazira Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Standard Chartered Bank - UAE
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- GVK Power & Infra Limited - India
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Cigading International Bulk Terminal - Indonesia
- Mintek Dendrill Indonesia
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Africa Commodities Group - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Makarim & Taira - Indonesia
- The University of Queensland
- TNB Fuel Sdn Bhd - Malaysia
- Grasim Industreis Ltd - India
- Commonwealth Bank - Australia
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Australian Coal Association
- Carbofer General Trading SA - India
- Petrochimia International Co. Ltd.- Taiwan
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Indika Energy - Indonesia
- Indonesian Coal Mining Association
- Mjunction Services Limited - India
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Chamber of Mines of South Africa
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
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- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- Wood Mackenzie - Singapore
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Coastal Gujarat Power Limited - India
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- Savvy Resources Ltd - HongKong
- Kalimantan Lumbung Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Bhushan Steel Limited - India
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Ministry of Mines - Canada
- Borneo Indobara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- India Bulls Power Limited - India
- White Energy Company Limited
- Malabar Cements Ltd - India
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- GMR Energy Limited - India
- Aditya Birla Group - India
- PTC India Limited - India
- Orica Mining Services - Indonesia
- Economic Council, Georgia
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Alfred C Toepfer International GmbH - Germany
- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Bhatia International Limited - India
- VISA Power Limited - India
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- San Jose City I Power Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- Manunggal Multi Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Parliament of New Zealand
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Rio Tinto Coal - Australia
- Xindia Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
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