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Thursday, 30 January 14
JPU SETTLEMENT PRICE AS A BENCHMARK WILL DECLINE IN IMPORTANCE BUT REMAIN RELEVANT, SAYS WOOD MACKENZIE
 JPU price will remain above spot, trending closer to spot till 2015 then increasing to 2035.
Japanese Power Utilities (JPU) are approaching a crucial negotiation period with Australian coal producers in March, when large volumes are contracted annually. Wood Mackenzie says market players can expect JPU prices to remain above market prices for the foreseeable future. As for price trends, JPUs will have to pay high premiums till 2015, before dipping from 2016 to 2020. Post-2020 to the longer term, premium over spot prices will trend upwards again. This is a result of a move away from JPU-type coal in key demand markets, which also acts to reduce the significance of JPU price as a benchmark, although not negating it altogether.
In the next few years the JPU premium over market price will remain high, settling below US$7 per tonne ($/t) by 2015. Mr Prakash Sharma, Asia Pacific Coal Market Analyst for Wood Mackenzie says, "Although global oversupply persists in the overall seaborne thermal coal market, for the highly specific JPU-type coal supply, the market will be progressively tight as other customers increase their consumption of this type of coal.”
In the medium term from 2016 to 2020, Wood Mackenzie forecasts a period where the JPU premium will decline to as low as US$3.80/t over market price as additional JPU-type supply is set to come online and producers seek to gain market share by competitively pricing their product. However, growth in demand for lower quality coal in key markets is impacting producers' product mix strategies; thus reducing the availability of JPU-type coal. This combined with a longer-term decline in JPU-type supply capacity is projected to support the premium over spot prices.
Mr Rory Simington, Coal Supply Research Analyst for Wood Mackenzie elaborates, "Fast growing demand markets of China, India and South Korea, to some degree are turning away from higher priced JPU-type low ash coal towards a more inexpensive higher ash product available on the spot market. Producers who have experienced low prices throughout 2013, and have had their margins squeezed, have reduced production costs by switching much of their incremental production towards this higher ash 5,500kcal/kg NAR market. This leaves the supply growth picture for JPU-type coal fairly flat."
Japanese power plants cannot absorb a higher ash product due to their ash disposal concerns and have only used relatively small amounts of low-ash sub-bituminous coal from Indonesia. Therefore JPUs will likely still demand predominantly JPU-type coal. However, Japan's role in the Asia Pacific coal market place will diminish as its proportion of the thermal market declines from 31% to only ten percent by 2035. Consequently, this reduces the significance of JPU price as a benchmark.
Mr Sharma says, "With the fairly flat supply growth outlook for JPU-type coal, a tighter market will result for Japanese procurement. JPUs are acutely aware of this development. Since Japan is completely reliant on coal imports, JPUs are willing to pay a premium over spot prices to lock-in the price for twelve months rather than risk supply availability by switching to index-linked pricing. This is crucial as we believe nuclear capacity in Japan will not return to pre-Fukushima levels. As such, other fuels including coal will need to play a larger role."
"Even if headlines suggest Japan is increasing imports from North America to reduce reliance on Australian producers, the negotiations are still of great importance to Japan as we do not foresee North American supply satisfying their requirements to the same extent Australian producers can." North America currently supplies two percent of Japan's thermal coal requirements. By 2025, Wood Mackenzie estimates North America will still only make up less than ten percent of Japan's thermal coal requirements.
For the longer term past 2020, Wood Mackenzie forecasts premia rising steadily again as the availability of JPU-type coal continues to decline. The margin between JPU settlement price and cost of JPU-type coal production will support the development of new projects. Therefore, JPUs will have to recognise the need to offer higher premiums in order to incentivise new supply. The steadily rising premium will reach US$5.50/t by 2027 and US$10/t in 2035 as higher cost coal projects are developed.
In summary, Mr Sharma says, "Japan recognises the need to secure supply and price stability. Therefore, JPUs favour contracts to the spot market, even at a premium. This will keep JPU pricing relevant albeit playing a diminishing role as a benchmark due to the growing market proportion of higher-ash coal in the region. In the longer term post-2020, this need will translate to JPUs having to pay higher premiums so as to incentivise Australian producers to maintain supply capacity. Hence, the JPU benchmark may lose the status of price-setter but will not likely become a price-taker even if it means that the premium will persist."
Wood Mackenzie's Editor’s notes:
JPU-type coal refers to the coal type imported by Japanese Power Utilities which is prime quality bituminous thermal coal (6322kcal/kg GAR) from Australia under term contracts.
Market prices refers to New FOB Newcastle Market Price @6000kcal/kg NAR. It is used interchangeably with the term 'spot price' in this news release.
About Wood Mackenzie
Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com
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Thursday, 20 February 14
LENGTHY DELAYS TO PANAMA CANAL EXPANSION POSE GLOBAL TRADE RISKS; US COAL PRODUCERS TO GREATLY BENEFIT ONCE COMPLETE, SAYS WOOD MACKENZIE
Wood Mackenzie expects the recent cost overrun disputes around the Panama Canal expansion to be resolved with limited disruption due to the signific ...
Thursday, 20 February 14
SUPRAMAX: IN ASIA IS IMPROVING SIGNIFICANTLY AND TURNED FROM APS TO DOP MARKET
Handy
The activity is back in the market after Chinese holidays. Supramax in Asia is improving significantly and turned from APS to DOP market. We ...
Wednesday, 19 February 14
NEWCASTLE PORT SHIPPED 30% MORE COAL WEEK ON WEEK
COALspot.com: In the week ended 17 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 18 February 14
PERUVIAN HIGH COMMISSIONER FOR MINING AFFAIRS WILL BE KEY NOTE SPEAKER AT THE COLOMBIAN COAL CONFERENCE 2014
Press Release: The High Commissioner for Mining Affairs in the Presidency of the Peruvian Council of Ministers, General (R) Daniel Urresti Elera, ha ...
Monday, 17 February 14
US COAL PRODUCTION IN 2013 FELL TO ITS LOWEST LEVEL IN 20 YEARS
COALspot.com: U.S coal production for 2013 totaled an estimated 996 million short tons (MMst), 21 MMst (2%) lower than in 2012. It is the first time ...
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- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Parry Sugars Refinery, India
- San Jose City I Power Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhatia International Limited - India
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- PTC India Limited - India
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Sical Logistics Limited - India
- Parliament of New Zealand
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Port Waratah Coal Services - Australia
- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- VISA Power Limited - India
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Interocean Group of Companies - India
- Romanian Commodities Exchange
- Coalindo Energy - Indonesia
- Indian Energy Exchange, India
- Posco Energy - South Korea
- Sojitz Corporation - Japan
- Georgia Ports Authority, United States
- Karaikal Port Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Intertek Mineral Services - Indonesia
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Attock Cement Pakistan Limited
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- The Treasury - Australian Government
- Gujarat Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Makarim & Taira - Indonesia
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- Ambuja Cements Ltd - India
- Minerals Council of Australia
- Vedanta Resources Plc - India
- Edison Trading Spa - Italy
- Chettinad Cement Corporation Ltd - India
- Globalindo Alam Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Latin American Coal - Colombia
- AsiaOL BioFuels Corp., Philippines
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- ASAPP Information Group - India
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Wilmar Investment Holdings
- Meenaskhi Energy Private Limited - India
- Semirara Mining Corp, Philippines
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Lanco Infratech Ltd - India
- Planning Commission, India
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- The University of Queensland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- Sinarmas Energy and Mining - Indonesia
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Indian Oil Corporation Limited
- Aboitiz Power Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Kepco SPC Power Corporation, Philippines
- New Zealand Coal & Carbon
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Economic Council, Georgia
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Larsen & Toubro Limited - India
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- ICICI Bank Limited - India
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Ministry of Mines - Canada
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
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