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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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Friday, 13 November 09
API4 IGNORES LOW COAL TRADES - SWISS SINGAPORE
* Jan, Feb S.Africa coal prices hit 12-month highs
* Indian trader says deals done dollars below index
Reuters reported that, the physical coal ...
Thursday, 12 November 09
INDONESIA'S BUMI COAL PRODUCTION TO INCREASE
The sale is predicted to jump 14 percent to 58 million tons.
Viva News reported that, PT Bumi Resources Tbk. (BUMI) projected that the company's ...
Thursday, 12 November 09
INDIA'S BHEL IS IN INDONESIA NOW WITH THE COST EFFECTIVE CFBC BASED BOILER TURBINE PACKAGES
COALspot.com(Indonesia): BHEL, the largest engineering and manufacturing enterprise in India in the energy-related / infrastructure sector, is now f ...
Thursday, 12 November 09
NTPC FARAKKA AND KAHALGAON UNITS SHUT DOWN ON COAL SHORTAGE
Operations at two units each of power major NTPC Ltd’s 1600 MW Farakka and the 2340 MW Kahalgaon stations have ground to a halt due to an acut ...
Thursday, 12 November 09
GANGAVARAM PORT SETS RECORD BY DISCHARGING 80,514 TONNE OF COAL CARGO
Gangavaram Port, the deepest port in the country with water depth of 20 meters, has achieved an unprecedented milestone by discharging 80,514 metric ...
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- Coal and Oil Company - UAE
- Kohat Cement Company Ltd. - Pakistan
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Cement Manufacturers Association - India
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Ministry of Finance - Indonesia
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Planning Commission, India
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- SN Aboitiz Power Inc, Philippines
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- IHS Mccloskey Coal Group - USA
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- Timah Investasi Mineral - Indoneisa
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- Toyota Tsusho Corporation, Japan
- Edison Trading Spa - Italy
- Australian Commodity Traders Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Heidelberg Cement - Germany
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Oldendorff Carriers - Singapore
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Petrochimia International Co. Ltd.- Taiwan
- Billiton Holdings Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Maharashtra Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- Mintek Dendrill Indonesia
- Sindya Power Generating Company Private Ltd
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Trasteel International SA, Italy
- The Treasury - Australian Government
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- LBH Netherlands Bv - Netherlands
- Indian Oil Corporation Limited
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Straits Asia Resources Limited - Singapore
- Sarangani Energy Corporation, Philippines
- Jindal Steel & Power Ltd - India
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- GMR Energy Limited - India
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Directorate Of Revenue Intelligence - India
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Renaissance Capital - South Africa
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Ministry of Mines - Canada
- PTC India Limited - India
- New Zealand Coal & Carbon
- The State Trading Corporation of India Ltd
- Bharathi Cement Corporation - India
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Gujarat Sidhee Cement - India
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Deloitte Consulting - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petron Corporation, Philippines
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- McConnell Dowell - Australia
- Jorong Barutama Greston.PT - Indonesia
- Posco Energy - South Korea
- Bukit Makmur.PT - Indonesia
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Thiess Contractors Indonesia
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- The University of Queensland
- Parliament of New Zealand
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