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Tuesday, 26 May 15
HOW HAS THE DROP IN OIL PRICES AFFECTED OTHER COMMODITIES? - CLYDE & CO
 KNOWLEDGE TO ELEVATE
The effects of the dramatic drop in the price of both Ice March Brent, the international oil marker, and its US counterpart Nymex March West Texas Intermediate, have been widespread. This is impacting not only the oil services industry, where many firms have cut their capital budgets as well as jobs, but also a number of markets across the world. The commodities market, in particular, has been widely affected with the prices of metals such as copper, lead and nickel dropping, albeit not as dramatically as oil, and the price of gold increasing.
In passing, it is worth noting that the death of King Abdullah in January 2015 prompted some investors to bet on a change in strategy as a result of the change in the leadership of Saudi Arabia, OPEC’s largest producer and de facto leader, with Crown Prince Salman succeeding King Abdullah. However, many analysts expect King Salman and Ali al-Naimi, Saudi Arabia’s oil minister, to stand by the existing Saudi oil policy, at least in the near term. That is, to allow market forces to determine the oil price and press ahead with unrestrained production of crude in order to eclipse more marginal producers and to not risk losing market share, despite the effects that this has had on the price of oil.
How has the drop in oil prices affected other commodities?
The sharp fall in oil prices amid deteriorating sentiment over the global economy has made investors weary of investing in other commodities.
Copper, in particular, has been hit very hard, slumping to its lowest price levels in nearly six years. This was triggered by aggressive selling by Chinese hedge funds earlier this month when the market was on the edge because of the collapse in the oil price and when physical demand in China was weak because of the approaching lunar New Year holiday. Other metals have also taken a hit, with nickel and lead experiencing recent sharp decreases.
As the price of oil has dropped, gold, on the other hand, has experienced its highest price level since August 2014 as many investors have sought to invest in the market to park their capital. With the Euro falling to an 11 year low as a result of a number of factors including the Swiss National Bank’s decision to decouple from the Euro and the European Central Bank’s quantitative easing measures, gold has risen very quickly.
On top of a growing trend for banks to dispose of their commodities businesses, there is a debate whether banks will continue to finance trading in commodities. Oil, at least in the near future, is likely to provide a low return with most commentators thinking that the price will not rise substantially for the foreseeable future, with some even going so as far as stating that the price will fall as low as USD20 per barrel. Therefore, the incentive for banks to finance this particular commodity would appear to have fallen away. This could see a space open for non-bank lenders to come into the market and play a much more active role in the financing of commodities. These entities are generally subject to less regulation and have access to a more diverse set of methods to inject capital into financings.
Impact on existing contracts
In the oil market, many, if not most participants will enter into hedging contracts against a price fluctuation. However, this is often a hedge against a rise in the oil price and some participants will, as a result of the current conditions, have found that they have been asked to make margin payments to hedge counterparties as they are ‘out of the money’ on the hedging contract.
Exit options?
Parties may find it difficult to remove themselves from their existing commodities contracts.
Force Majeure: A force majeure clause allows one party who has been subject to a pre-defined event to suspend performance under the contract, or , in a worst case scenario, allow one or both parties to terminate the contract. The key point to note is that performance by the affected party should be rendered impossible to perform (sometimes being severely hindered is also considered to constitute force majeure). Some parties may look to rely on this provision, however it is unlikely that the fall in oil prices will constitute a force majeure event under contracts.
Material Adverse Change clauses: There is a possibility that parties could look to material adverse change clauses in their agreements as a way of terminating their contracts. However, these clauses are usually drafted to concern the state of the individual contract participants (e.g. a party’s credit rating) rather than market realities. These provisions are also notoriously difficult to rely on in the event of a termination. Of course, if a party’s credit rating, for example, were to be affected because of the fall in oil prices, then this could provide an option for the other party to terminate under this type of provision.
What can parties do to counter the drop in oil prices?
It may be possible for parties to include, in future contracts, a clause which is effectively a ‘hedge’ to be triggered by a pre-determined event (for instance a defined rise or fall in the oil price, e.g. if oil drops below USDX per barrel). This could give parties the ability to re-price the contract in this event, to ensure the contract remains economically viable, or at least to be obliged to enter into good faith negotiations around re-pricing. Depending on the level of bargaining power between the parties, it may even be possible to incorporate such a fluctuation as a termination event.
Existing contracts could also be reviewed to see if there is the possibility of amending them to include such a clause, but re-negotiating an existing contract which does not have a contractual mechanism for this already built in would seem unlikely.
The full impact and the duration of the drop in oil prices remains to be seen; but what is certain is that this is a worrying time for the commodities market. Parties will have to consider the terms of their existing contracts as well as continuing to consider ways to mitigate risk when embarking on transactions in the future. This could include a renewed reliance upon derivatives as a way of protecting against price and foreign exchange risk.
Source: Clyde & Co | Hellenic Shipping News
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Tuesday, 26 May 15
FOB INDONESIA COAL SWAP; UP WEEK OVER WEEK
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains week over week and lost month on month, this past week.
The Q3 swap was declined ...
Monday, 25 May 15
FOB NEWCASTLE COAL SWAP Q1'16 CLOSED LOWER THAN Q3'15 CLOSING
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery gained US$ 0.92 per MT (2.07%) month over month and US$ 0.70 week on week. ...
Monday, 25 May 15
CFR SOUTH CHINA COAL SWAP : Q3, Q4'15 & Q1'16 INCREASED M-O-M AND W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q3’ 2015 delivery up US$ 1.55 (3.09%) per MT month over month and US$ 0.72 (1.41%) pe ...
Sunday, 24 May 15
INDONESIA TO INDIA PANAMAX CHARTER RATES WERE RATING AT AROUND US$ 5500
COALspot.com: The freight market softened in all segments this past week.
The BDI was dropped 7.57 percent week over week and closed at 586 po ...
Friday, 22 May 15
FOB INDONESIA COAL Q3'15 SWAP FINISHED THE WEEK UP 38 CENTS TO $43.65 PER MT
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains week over week and lost month on month, past week.
The Q3 swap was declined US$ ...
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Showing 3006 to 3010 news of total 6871 |
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- Bukit Makmur.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Minerals Council of Australia
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- Renaissance Capital - South Africa
- Bayan Resources Tbk. - Indonesia
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Siam City Cement - Thailand
- Africa Commodities Group - South Africa
- Ceylon Electricity Board - Sri Lanka
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Central Electricity Authority - India
- PTC India Limited - India
- Mjunction Services Limited - India
- Eastern Energy - Thailand
- Antam Resourcindo - Indonesia
- Bulk Trading Sa - Switzerland
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- Directorate Of Revenue Intelligence - India
- Karbindo Abesyapradhi - Indoneisa
- Anglo American - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- CNBM International Corporation - China
- Commonwealth Bank - Australia
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Salva Resources Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Cement Manufacturers Association - India
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Riau Bara Harum - Indonesia
- Sakthi Sugars Limited - India
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Leighton Contractors Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Baramulti Group, Indonesia
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Bhoruka Overseas - Indonesia
- Interocean Group of Companies - India
- Medco Energi Mining Internasional
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Electricity Generating Authority of Thailand
- Straits Asia Resources Limited - Singapore
- Xindia Steels Limited - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Bhushan Steel Limited - India
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indo Tambangraya Megah - Indonesia
- Videocon Industries ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Edison Trading Spa - Italy
- Malabar Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Australian Commodity Traders Exchange
- Borneo Indobara - Indonesia
- Tata Chemicals Ltd - India
- Latin American Coal - Colombia
- Bahari Cakrawala Sebuku - Indonesia
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- Larsen & Toubro Limited - India
- Agrawal Coal Company - India
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Parry Sugars Refinery, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Neyveli Lignite Corporation Ltd, - India
- Carbofer General Trading SA - India
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Bhatia International Limited - India
- Deloitte Consulting - India
- Kumho Petrochemical, South Korea
- Sree Jayajothi Cements Limited - India
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Power Finance Corporation Ltd., India
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Standard Chartered Bank - UAE
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- LBH Netherlands Bv - Netherlands
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Altura Mining Limited, Indonesia
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Gujarat Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- PetroVietnam Power Coal Import and Supply Company
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- Bukit Baiduri Energy - Indonesia
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