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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, 12 November 09
FOREIGN INVESTMENT IN RUSSIAN COAL SECTOR
Reuters reported that, Russia's coal mines, particularly in the Arctic and Far East, are attracting interest from foreign investors as commodity pr ...
Thursday, 12 November 09
BANPU TO INVEST US$ 466 M
Plan targets 33.5m tonnes of coal per year
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, is planning capital investments of ...
Wednesday, 11 November 09
NORTHSTAR TAKES 40 PER CENT OF INDONESIAN MINING COMPANY
AltAssets reported that, PT Northstar Pacific Partners, the Indonesian affiliate of US private equity firm TPG, has taken a 40 per cent stake in Ind ...
Wednesday, 11 November 09
INDONESIAN COAL MINERS SOLD BIG VOLUMES OF 2010 TO CHINA
* China has scooped up large volumes of Indonesian coal
* Total exports to China in 2010 seen to exceed 20 million T
* Chinese, Indian demand may ...
Wednesday, 11 November 09
INDIAN COAL IMPORT FROM SA IN OCTOBER
Reuters reported that India imported 2.4 million tonnes of coal from South Africa's Richards Bay Coal Terminal in October 2009, 35% of the total of ...
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- Riau Bara Harum - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- Bukit Baiduri Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Bayan Resources Tbk. - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- London Commodity Brokers - England
- Baramulti Group, Indonesia
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Electricity Generating Authority of Thailand
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- India Bulls Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Medco Energi Mining Internasional
- Commonwealth Bank - Australia
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Uttam Galva Steels Limited - India
- Port Waratah Coal Services - Australia
- Ceylon Electricity Board - Sri Lanka
- Aboitiz Power Corporation - Philippines
- Sojitz Corporation - Japan
- Bhatia International Limited - India
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Coalindo Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- McConnell Dowell - Australia
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- Gujarat Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Formosa Plastics Group - Taiwan
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
- Parliament of New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Kepco SPC Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Global Green Power PLC Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Salva Resources Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Australian Coal Association
- Borneo Indobara - Indonesia
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Economic Council, Georgia
- Bahari Cakrawala Sebuku - Indonesia
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- PTC India Limited - India
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- Toyota Tsusho Corporation, Japan
- Georgia Ports Authority, United States
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Trasteel International SA, Italy
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Indogreen Group - Indonesia
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Edison Trading Spa - Italy
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- New Zealand Coal & Carbon
- PetroVietnam Power Coal Import and Supply Company
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
- Binh Thuan Hamico - Vietnam
- Goldman Sachs - Singapore
- Iligan Light & Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- GMR Energy Limited - India
- Alfred C Toepfer International GmbH - Germany
- Africa Commodities Group - South Africa
- Latin American Coal - Colombia
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