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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$10/t in 2035 as higher cost coal projects are developed.
In summary, Mr Sharma says, "Japan recognises the need to secure supply and price stability. Therefore, JPUs favour contracts to the spot market, even at a premium. This will keep JPU pricing relevant albeit playing a diminishing role as a benchmark due to the growing market proportion of higher-ash coal in the region. In the longer term post-2020, this need will translate to JPUs having to pay higher premiums so as to incentivise Australian producers to maintain supply capacity. Hence, the JPU benchmark may lose the status of price-setter but will not likely become a price-taker even if it means that the premium will persist."
Wood Mackenzie's Editor’s notes:
JPU-type coal refers to the coal type imported by Japanese Power Utilities which is prime quality bituminous thermal coal (6322kcal/kg GAR) from Australia under term contracts.
Market prices refers to New FOB Newcastle Market Price @6000kcal/kg NAR. It is used interchangeably with the term 'spot price' in this news release.
About Wood Mackenzie
Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com
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Monday, 03 February 14
SUB-BIT INDONESIA COAL SWAP GAINED WEEK ON WEEK
COALspot.com – Swaps prices gained for thermal coal loading from Indonesia, the world’s largest exporter of the fuel, according SGX.
...
Monday, 03 February 14
API 8 CFR SOUTH CHINA COAL SWAP CONTRACTS FALL
COALspot.com: API 8 CFR South China Coal swaps for average Q1 14 delivery lost 4.71 percent month on month and closed at US$ 78.87 per mt as on Frid ...
Monday, 03 February 14
COAL FREIGHT RATES REMAIN UNDER PRESSURE
COALspot.com: The BDI is fell 50 pct over last one month which seems to be one of the lowest fall in last few years.
The BDI was down by 11 ...
Friday, 31 January 14
U.S. COAL PRODUCTION TOTALED APPROXIMATELY 19.2 MMST W-O-W
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.2 million short tons (mmst) of coal in ...
Friday, 31 January 14
DRY BULK MARKET STILL ON A FALL, EXPECTED TO WORSEN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market is definitely in the doldrums since the start of the year, in what could only be described as a "lost" month for indus ...
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- Chamber of Mines of South Africa
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- ASAPP Information Group - India
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Mjunction Services Limited - India
- SMC Global Power, Philippines
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- Simpson Spence & Young - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- Baramulti Group, Indonesia
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Salva Resources Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Agrawal Coal Company - India
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Australian Coal Association
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- Planning Commission, India
- Mintek Dendrill Indonesia
- Africa Commodities Group - South Africa
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- New Zealand Coal & Carbon
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- GAC Shipping (India) Pvt Ltd
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Tamil Nadu electricity Board
- Global Green Power PLC Corporation, Philippines
- Bangladesh Power Developement Board
- Global Coal Blending Company Limited - Australia
- Marubeni Corporation - India
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Anglo American - United Kingdom
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Parliament of New Zealand
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- Romanian Commodities Exchange
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- Sarangani Energy Corporation, Philippines
- GMR Energy Limited - India
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Thiess Contractors Indonesia
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Mines - Canada
- Leighton Contractors Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- India Bulls Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Borneo Indobara - Indonesia
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Central Electricity Authority - India
- Sical Logistics Limited - India
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- Bukit Baiduri Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- European Bulk Services B.V. - Netherlands
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Coastal Gujarat Power Limited - India
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vedanta Resources Plc - India
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Neyveli Lignite Corporation Ltd, - India
- Economic Council, Georgia
- White Energy Company Limited
- Sinarmas Energy and Mining - Indonesia
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