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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, 16 November 09
141 VESSELS ARE EXPECTED TO LOAD 8.833 MILLION TONS OF INDONESIAN COAL BEFORE 30 NOVEMBER 2009
COALspot.com (Indonesia): 141 vessels are expected to load or sail with 8.833 million tons of Indonesian coal before 30 November 2009.
A source f ...
Sunday, 15 November 09
NALCO SHELVES SA PROJECT- PUTS IRAN PROJECT ON HOLD
The Economic Times reported that, In a twin decision on its global operations involving about Rs 27,000-crore (US$ 5.847billions) investment, the st ...
Saturday, 14 November 09
SHORT PERIOD RATES FOR SUPRAMAX WAS AT US$ 19,000 / 20,000 PER DAY FOR VESSELS OPENING FAR EAST / SE ASIA - VISTAAR SINGAPORE
COALspot.com (Singaproe): BDI continues to rally crossing the 4,000 mark. The BDI increased this week by 718 points up by 21 pct and closed at 4,111 ...
Saturday, 14 November 09
CHINA HAS BEEN THE LARGEST SINGLE BUYER OF INDONESIAN COAL IN OCTOBER, TAKING 24.37% OF TOTAL EXPORT QUANTITY OF 22.637 MILLION TONS
COALspot.com (Indonesia): China has been the largest single buyer of Indonesian coal in October 2009, taking 24.37% of total export quantity o ...
Saturday, 14 November 09
ASIA'S POWER SECTOR IS INVESTING IN COALMINES TO SECURE SUPPLIES
COALspot.com (Press Release): Asia Coal Power conference in Jakarta pinpoints growing power demand in Asia & Power sector investments in Indones ...
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- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Siam City Cement - Thailand
- Thiess Contractors Indonesia
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Sical Logistics Limited - India
- Bulk Trading Sa - Switzerland
- TNB Fuel Sdn Bhd - Malaysia
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Price Waterhouse Coopers - Russia
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Simpson Spence & Young - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- Madhucon Powers Ltd - India
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Africa Commodities Group - South Africa
- Star Paper Mills Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhushan Steel Limited - India
- Heidelberg Cement - Germany
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- CIMB Investment Bank - Malaysia
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Oldendorff Carriers - Singapore
- Minerals Council of Australia
- Energy Development Corp, Philippines
- Kumho Petrochemical, South Korea
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Tamil Nadu electricity Board
- White Energy Company Limited
- CNBM International Corporation - China
- London Commodity Brokers - England
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indika Energy - Indonesia
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Timah Investasi Mineral - Indoneisa
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Dalmia Cement Bharat India
- Australian Coal Association
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Manunggal Multi Energi - Indonesia
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Planning Commission, India
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Parliament of New Zealand
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Latin American Coal - Colombia
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Lanco Infratech Ltd - India
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- Port Waratah Coal Services - Australia
- Marubeni Corporation - India
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Orica Australia Pty. Ltd.
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Carbofer General Trading SA - India
- PNOC Exploration Corporation - Philippines
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Central Electricity Authority - India
- Uttam Galva Steels Limited - India
- Coastal Gujarat Power Limited - India
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- McConnell Dowell - Australia
- Krishnapatnam Port Company Ltd. - India
- Kapuas Tunggal Persada - Indonesia
- Jaiprakash Power Ventures ltd
- Eastern Coal Council - USA
- Parry Sugars Refinery, India
- Chettinad Cement Corporation Ltd - India
- Formosa Plastics Group - Taiwan
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Anglo American - United Kingdom
- Interocean Group of Companies - India
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