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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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Sunday, 22 November 09
SHORT PERIOD RATES FOR SUPRAMAX WAS AT US$ 25,000/26,000 PER DAY FOR VESSELS OPENING FAR EAST / SE ASIA - VISTAAR ANALYSIS
COALspot.com (Singapore): Analyised by Capt. Radhakrishnan Reddy, Managing Director of Vistaar Shipping Services, Singapore.
BDI hits a new high ...
Friday, 20 November 09
INDONESIA UNITED TRACTORS PLANS $430 MLN CAPEX IN 2010
Reuters reported that, Indonesian heavy equipment distributor and mining contractor PT United Tractors Tbk plans capital expenditure of $430 million ...
Friday, 20 November 09
DRY BULK SHIP OWNERS HOPE RALLY WILL LAST
Boon times are still on the daily agenda of every dry bulk ship owner these days after one of the toughest year in the industry’s century-old ...
Friday, 20 November 09
NTPC LOOKING FOR LONG TERM CONTRACTS FOR COAL IMPORT
Business Standard of India reported that, State run power firm NTPC today said it is looking for long-term supply of coal from overseas market to me ...
Friday, 20 November 09
CHINESE COKING COAL SUPPLY TO BE 'TIGHT' IN 2010, KGI SAYS
Bloomberg Reported that, Stephen Wang, an analyst with KGI Securities in Taipei, comments on the outlook for Chinese steel production and demand for ...
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- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Marubeni Corporation - India
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Latin American Coal - Colombia
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Edison Trading Spa - Italy
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- White Energy Company Limited
- Parry Sugars Refinery, India
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Electricity Generating Authority of Thailand
- Independent Power Producers Association of India
- Chamber of Mines of South Africa
- Ministry of Finance - Indonesia
- Coastal Gujarat Power Limited - India
- SMG Consultants - Indonesia
- Eastern Energy - Thailand
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Agrawal Coal Company - India
- Alfred C Toepfer International GmbH - Germany
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- Aboitiz Power Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Mercuria Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- ICICI Bank Limited - India
- Madhucon Powers Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- VISA Power Limited - India
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Indonesian Coal Mining Association
- Cigading International Bulk Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Commonwealth Bank - Australia
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Thiess Contractors Indonesia
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Grasim Industreis Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- Samtan Co., Ltd - South Korea
- European Bulk Services B.V. - Netherlands
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Bukit Makmur.PT - Indonesia
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Orica Australia Pty. Ltd.
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Standard Chartered Bank - UAE
- Parliament of New Zealand
- CNBM International Corporation - China
- Global Coal Blending Company Limited - Australia
- Simpson Spence & Young - Indonesia
- Energy Development Corp, Philippines
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- Aditya Birla Group - India
- OPG Power Generation Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- PTC India Limited - India
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- LBH Netherlands Bv - Netherlands
- Planning Commission, India
- Renaissance Capital - South Africa
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- SMC Global Power, Philippines
- Meralco Power Generation, Philippines
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
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