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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, 30 January 14
PANAMAX MARKET IS SOFTENING ON LESS ACTIVITY IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic rates have been slowly sliding but ows can still achieve decent money for TArv´s. USG positions still being fixed in re ...
Thursday, 30 January 14
TANKER PROFITABILITY IS THE 'MILLION-DOLLAR' QUESTION FOR SHIP OWNERS THIS YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The tanker market conditions are expected to remain challenging throughout the year for tanker owners, but even more pressing will be the issue of a ...
Tuesday, 28 January 14
GLOBAL COKING AND STEAM COAL PRODUCTION HAVE GROWN 2% TO 3% TO ABOUT 7.1 BILLION TONNES AS OF THE END OF 2013 - VDKI
COALspot.com (Press Release): Initial figures on the world hard coal market at the VDKi ((Association of Coal Importers - German) New Year’s R ...
Tuesday, 28 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS JUMP 13.75% WEEK ON WEEK
COALspot.com: In the week ended 27 January 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 28 January 14
RESOURCE NATIONALISM OR PROTECTIONISM FOR THE MINING AND EXTRACTIVES INDUSTRY - JOHN WHITTAKER & MICHAEL SWANGARD
Resource nationalism or protectionism for the mining and extractives industry as well as soft commodities sector and the oil industry.
‘Res ...
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- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Mercator Lines Limited - India
- Billiton Holdings Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Toyota Tsusho Corporation, Japan
- Posco Energy - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- Kobexindo Tractors - Indoneisa
- Electricity Authority, New Zealand
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Tamil Nadu electricity Board
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- Miang Besar Coal Terminal - Indonesia
- New Zealand Coal & Carbon
- Meralco Power Generation, Philippines
- Orica Australia Pty. Ltd.
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Bhatia International Limited - India
- Barasentosa Lestari - Indonesia
- Thiess Contractors Indonesia
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- Makarim & Taira - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- Global Coal Blending Company Limited - Australia
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- Banpu Public Company Limited - Thailand
- McConnell Dowell - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- Wood Mackenzie - Singapore
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- Indian Oil Corporation Limited
- European Bulk Services B.V. - Netherlands
- Carbofer General Trading SA - India
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Oldendorff Carriers - Singapore
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Dalmia Cement Bharat India
- Vedanta Resources Plc - India
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Central Java Power - Indonesia
- Planning Commission, India
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Kartika Selabumi Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Energy Development Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- The University of Queensland
- Indo Tambangraya Megah - Indonesia
- Australian Coal Association
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Rio Tinto Coal - Australia
- Sindya Power Generating Company Private Ltd
- Chettinad Cement Corporation Ltd - India
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- Coal and Oil Company - UAE
- Baramulti Group, Indonesia
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- Orica Mining Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Minerals Council of Australia
- Thai Mozambique Logistica
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement PLC, Thailand
- Sinarmas Energy and Mining - Indonesia
- VISA Power Limited - India
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