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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, 07 December 09
CHINA COKING COAL PRICE MAY RISE 14% ON DEFICIT, CITIGROUP SAYS
Coking coal prices in China, the world’s biggest steel producer, may rise 14 percent next year because of a supply deficit, Citigroup Inc. sai ...
Monday, 07 December 09
JSW STEEL TO SELL MOZAMBIQUE COAL MINE FOR RS 300 CRORE
JSW Steel may sell its coal mine in Mozambique to sister company JSW Energy as the mine has become commercially unviable for the steel producer, a t ...
Monday, 07 December 09
BLACK RIDGE MINING ENTERS AGREEMENT WITH INDONESIAN COAL PRODUCER
Australian-listed Black Ridge Mining has entered into an exclusive dealing and non-circumvention agreement with Indonesian coal producer PT. Inmas A ...
Sunday, 06 December 09
THE ECI / CHINA (S7) ROUTE SOFTENED AND WAS AT US$ 25,275 PER DAY - VISTAAR
COALspot.com (Singapore): "The market was bit soft in the beginning of the week, however towards mid week that market started to pick up and th ...
Sunday, 06 December 09
NEW MANGALORE PORT GETS UPCL'S FIRST COAL PARCEL FROM INDONESIA
The Lanco Group-promoted Udupi Power Corporation Ltd (UPCL) has received the first parcel of imported coal from Indonesia at the New Mangalore Port. ...
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- Trasteel International SA, Italy
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Bharathi Cement Corporation - India
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- Minerals Council of Australia
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Krishnapatnam Port Company Ltd. - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- PTC India Limited - India
- SMG Consultants - Indonesia
- Thiess Contractors Indonesia
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Australian Coal Association
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ceylon Electricity Board - Sri Lanka
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Coastal Gujarat Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Sical Logistics Limited - India
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- Economic Council, Georgia
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Altura Mining Limited, Indonesia
- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- Bhushan Steel Limited - India
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Kideco Jaya Agung - Indonesia
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Commonwealth Bank - Australia
- Romanian Commodities Exchange
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- Riau Bara Harum - Indonesia
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Maheswari Brothers Coal Limited - India
- OPG Power Generation Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- Heidelberg Cement - Germany
- VISA Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- Chettinad Cement Corporation Ltd - India
- Samtan Co., Ltd - South Korea
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Planning Commission, India
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bhatia International Limited - India
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Bukit Baiduri Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- Independent Power Producers Association of India
- AsiaOL BioFuels Corp., Philippines
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Iligan Light & Power Inc, Philippines
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- SN Aboitiz Power Inc, Philippines
- Wood Mackenzie - Singapore
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Standard Chartered Bank - UAE
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Coalindo Energy - Indonesia
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- MS Steel International - UAE
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Parliament of New Zealand
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- CIMB Investment Bank - Malaysia
- New Zealand Coal & Carbon
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
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