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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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- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- Kepco SPC Power Corporation, Philippines
- Xindia Steels Limited - India
- Tamil Nadu electricity Board
- Meenaskhi Energy Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Altura Mining Limited, Indonesia
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Kobexindo Tractors - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- Parry Sugars Refinery, India
- Posco Energy - South Korea
- Central Electricity Authority - India
- Latin American Coal - Colombia
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Jindal Steel & Power Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- Riau Bara Harum - Indonesia
- Medco Energi Mining Internasional
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Price Waterhouse Coopers - Russia
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Jorong Barutama Greston.PT - Indonesia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Kaltim Prima Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Africa Commodities Group - South Africa
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- PowerSource Philippines DevCo
- Energy Development Corp, Philippines
- Minerals Council of Australia
- Banpu Public Company Limited - Thailand
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Heidelberg Cement - Germany
- Ministry of Finance - Indonesia
- Wilmar Investment Holdings
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- PNOC Exploration Corporation - Philippines
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- IHS Mccloskey Coal Group - USA
- Samtan Co., Ltd - South Korea
- Malabar Cements Ltd - India
- Jaiprakash Power Ventures ltd
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Ministry of Mines - Canada
- Thiess Contractors Indonesia
- VISA Power Limited - India
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Star Paper Mills Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- Sindya Power Generating Company Private Ltd
- Bhatia International Limited - India
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- ASAPP Information Group - India
- Bangladesh Power Developement Board
- Metalloyd Limited - United Kingdom
- Mjunction Services Limited - India
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Sojitz Corporation - Japan
- Aditya Birla Group - India
- Lanco Infratech Ltd - India
- Attock Cement Pakistan Limited
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
- Videocon Industries ltd - India
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Bharathi Cement Corporation - India
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Petron Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Georgia Ports Authority, United States
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- European Bulk Services B.V. - Netherlands
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Australian Coal Association
- Carbofer General Trading SA - India
- Siam City Cement - Thailand
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- MS Steel International - UAE
- Salva Resources Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Wood Mackenzie - Singapore
- Makarim & Taira - Indonesia
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- LBH Netherlands Bv - Netherlands
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
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