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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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Thursday, 19 November 09
FAST-TRACK FOCUS ON COAL POWER MAY COST INDONESIA BILLIONS
The Jakartaglobe reported that, As it begins to tap its massive coal reserves to generate cheap electricity, Indonesia may face additional costs of ...
Wednesday, 18 November 09
THAI PTT PLANS COAL MINE INVESTMENT IN INDONESIA
* To conclude Indonesian coal mine buy in 6 months
* Sees coal output jumping to 20 mln tonnes in five years
Reuters reported that, PTT , ...
Wednesday, 18 November 09
ASIA-PACIFIC MINISTERIAL CONFERENCE ON PUBLIC-PRIVATE PARTNERSHIPS FOR INFRASTRUCTURE DEVELOPMENT
“Building Asia’s Infrastructure”
COALspot.com (Indonesia) Press Release: Infrastructure Asia 2010 is Asia’s premier infra ...
Wednesday, 18 November 09
AMBUJA COAL TENDER PRICES EQUATE TO $61.50/T FOB
Reuters reported that, coal prices achieved by Indian cement maker Gujarat Ambuja in its early November tender equate to $61.50 a tonne FOB Richards ...
Tuesday, 17 November 09
JSW STEEL MAY SPEND $500 MILLION TO ACQUIRE COAL MINES OVERSEAS
JSW Steel Ltd., India’s third- biggest producer, may spend $500 million buying coal mines overseas, securing supplies for its local expansion. ...
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- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Therma Luzon, Inc, Philippines
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- McConnell Dowell - Australia
- TeaM Sual Corporation - Philippines
- Bangladesh Power Developement Board
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- Kumho Petrochemical, South Korea
- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Parry Sugars Refinery, India
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Antam Resourcindo - Indonesia
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- GVK Power & Infra Limited - India
- San Jose City I Power Corp, Philippines
- The Treasury - Australian Government
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- Mercator Lines Limited - India
- Petron Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Samtan Co., Ltd - South Korea
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Global Business Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Australian Commodity Traders Exchange
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Bulk Trading Sa - Switzerland
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Global Green Power PLC Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Orica Mining Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Chettinad Cement Corporation Ltd - India
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Sinarmas Energy and Mining - Indonesia
- India Bulls Power Limited - India
- Borneo Indobara - Indonesia
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Larsen & Toubro Limited - India
- Price Waterhouse Coopers - Russia
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Madhucon Powers Ltd - India
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Ministry of Mines - Canada
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Gujarat Sidhee Cement - India
- Kohat Cement Company Ltd. - Pakistan
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- European Bulk Services B.V. - Netherlands
- Malabar Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Energy Development Corp, Philippines
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Ministry of Transport, Egypt
- Sree Jayajothi Cements Limited - India
- Pendopo Energi Batubara - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Globalindo Alam Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Thiess Contractors Indonesia
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- Bayan Resources Tbk. - Indonesia
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Australian Coal Association
- Ceylon Electricity Board - Sri Lanka
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Economic Council, Georgia
- Timah Investasi Mineral - Indoneisa
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
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