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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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Sunday, 26 January 14
FREIGHT RATES FALL FURTHER ON LACK OF CARGOES - SOLYM CARRIERS
COALspot.com: The freight market has continued to soften further this week with BDI down by 12.31 pct. BDI was closed at 1,246 points week ended 24 ...
Friday, 24 January 14
US COAL PRODUCTION UP 3.9% ON WEEK IN WEEK ENDED SATURDAY - EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.1 million short tons (mmst) of coal in ...
Friday, 24 January 14
DRY BULK MARKET STRUGGLING TO FIND FIRM FOOTING IN START OF 2014 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been faltering since the start of 2014, struggling to hold its ground as low seasonal demand has hindered further growth in ...
Thursday, 23 January 14
PANAMAX : THIS WEEK THE ACTIVITY CAME DOWN DRAMATICALLY - FEARNRESEARCH
Handy
With the Chinese New Year approaching the activity and rate levels are sliding in both hemispheres. Rates in the Atlantic have knocked off so ...
Thursday, 23 January 14
30 DAYS LEFT TO REGISTER FOR PACIFIC BASIN COAL CONFERENCE
COALspot.com: (Press Release) : IHS Inc. (NYSE: IHS), the leading global source of information and analysis, will host the Pacific Basin Coal Confer ...
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- Banpu Public Company Limited - Thailand
- Gujarat Sidhee Cement - India
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- Indika Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Vijayanagar Sugar Pvt Ltd - India
- Coalindo Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- CNBM International Corporation - China
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Maharashtra Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Ceylon Electricity Board - Sri Lanka
- Commonwealth Bank - Australia
- GAC Shipping (India) Pvt Ltd
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- The University of Queensland
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Madhucon Powers Ltd - India
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Riau Bara Harum - Indonesia
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- Oldendorff Carriers - Singapore
- Cigading International Bulk Terminal - Indonesia
- Mintek Dendrill Indonesia
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
- Dalmia Cement Bharat India
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- Eastern Energy - Thailand
- Mercator Lines Limited - India
- Central Electricity Authority - India
- Renaissance Capital - South Africa
- San Jose City I Power Corp, Philippines
- Simpson Spence & Young - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Port Waratah Coal Services - Australia
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Binh Thuan Hamico - Vietnam
- Kobexindo Tractors - Indoneisa
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Electricity Generating Authority of Thailand
- Barasentosa Lestari - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Mjunction Services Limited - India
- Ministry of Transport, Egypt
- MS Steel International - UAE
- Trasteel International SA, Italy
- Altura Mining Limited, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Wilmar Investment Holdings
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Tata Chemicals Ltd - India
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- Therma Luzon, Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- Bangladesh Power Developement Board
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- Energy Development Corp, Philippines
- Africa Commodities Group - South Africa
- Australian Coal Association
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement - Thailand
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- GMR Energy Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
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