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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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Wednesday, 12 February 14
NEW BUILDING ORDERS REACHING NEW POST-CRISIS HEIGHTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners are looking to take advantage of the last few attractive deals in the new building market, before prices start climbing to new highs and ...
Wednesday, 12 February 14
2013 WAS THE YEAR OF PRIVATE EQUITY FUNDING - TIMOS PAPADIMITRIOU
COALspot.com: People say that money makes the world go round. Well, can it be that it’s the other way around? Is it possible that money needs ...
Tuesday, 11 February 14
INDONESIAN COAL SWAP SHOWS STRONG GROWTH IN 2014 SECOND HALF
COALspot.com – Swaps prices slide for thermal coal loading from Indonesia, the world’s largest exporter of the fuel, according SGX.
T ...
Tuesday, 11 February 14
AUSTRALIA'S NEWCASTLE COAL EXPORTS SLIDE AROUND 15% WEEK ON WEEK
COALspot.com: In the week ended 10 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 11 February 14
SHIP OWNERS INVEST IN 447 NEWBUILDINGS AND SECOND HAND VESSELS DURING JANUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite a rough start to the year for the dry bulk freight market and lackluster performance from most other shipping sub-segments, ship owners have ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Jaiprakash Power Ventures ltd
- Bukit Makmur.PT - Indonesia
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- Wood Mackenzie - Singapore
- Oldendorff Carriers - Singapore
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Xindia Steels Limited - India
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- Global Coal Blending Company Limited - Australia
- Australian Commodity Traders Exchange
- Baramulti Group, Indonesia
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Malabar Cements Ltd - India
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- Rashtriya Ispat Nigam Limited - India
- Sojitz Corporation - Japan
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- Interocean Group of Companies - India
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Coalindo Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- GMR Energy Limited - India
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Orica Australia Pty. Ltd.
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Mines - Canada
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- South Luzon Thermal Energy Corporation
- Asmin Koalindo Tuhup - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Attock Cement Pakistan Limited
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- The Treasury - Australian Government
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Bulk Trading Sa - Switzerland
- Electricity Generating Authority of Thailand
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- The University of Queensland
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- SMG Consultants - Indonesia
- Sree Jayajothi Cements Limited - India
- GAC Shipping (India) Pvt Ltd
- Marubeni Corporation - India
- Parliament of New Zealand
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- PTC India Limited - India
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Kobexindo Tractors - Indoneisa
- Ministry of Finance - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Chettinad Cement Corporation Ltd - India
- Lanco Infratech Ltd - India
- Ceylon Electricity Board - Sri Lanka
- GVK Power & Infra Limited - India
- Planning Commission, India
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Global Business Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- Singapore Mercantile Exchange
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