We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Wednesday, 20 May 15
FOB RICHARDS BAY COAL SWAPS GAINED M-O-M, W-O-W
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 increased month over month and week over week.
The Q3 swap has increas ...
Wednesday, 20 May 15
BUKIT ASAM'S AVERAGE EXPORT PRICE WAS UNDER PRESSURE DURING Q1
COALspot.com: Indonesia’s state owned coal producer saw their profits fall in the first quarter of the year compared to the same period last ...
Wednesday, 20 May 15
IRON ORE PRICES TO REMAIN WEAK ON LOW DEMAND, HIGH OUTPUT - FITCH
Iron ore prices will stay low for several years due to increasing supply, weak demand growth in China and the slower-than-expected closure of high- ...
Tuesday, 19 May 15
KOMIPO IS SEEKING TOTAL 2.34 MMT OF HCV AND LCV COAL FOR 2015 - 2017
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 2.34 million Metric Tons (MT) of HCV ...
Monday, 18 May 15
FOB NEWCASTLE COAL SWAPS SCORE MONTHLY GAINS
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery gained US$ 0.87 per MT (1.99%) month over month and lost US$ 0.03 week on w ...
|
|
|
Showing 3016 to 3020 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kideco Jaya Agung - Indonesia
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- Larsen & Toubro Limited - India
- Vizag Seaport Private Limited - India
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Planning Commission, India
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sinarmas Energy and Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- PNOC Exploration Corporation - Philippines
- Mercator Lines Limited - India
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Green Power PLC Corporation, Philippines
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Star Paper Mills Limited - India
- Anglo American - United Kingdom
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Bayan Resources Tbk. - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Romanian Commodities Exchange
- Standard Chartered Bank - UAE
- Chettinad Cement Corporation Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement - Thailand
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Essar Steel Hazira Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bhatia International Limited - India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Riau Bara Harum - Indonesia
- Coalindo Energy - Indonesia
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Bahari Cakrawala Sebuku - Indonesia
- Karaikal Port Pvt Ltd - India
- Parry Sugars Refinery, India
- Georgia Ports Authority, United States
- Goldman Sachs - Singapore
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Latin American Coal - Colombia
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Heidelberg Cement - Germany
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- Baramulti Group, Indonesia
- PTC India Limited - India
- Sical Logistics Limited - India
- London Commodity Brokers - England
- Trasteel International SA, Italy
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Bukit Baiduri Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- McConnell Dowell - Australia
- The University of Queensland
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Commonwealth Bank - Australia
- Mintek Dendrill Indonesia
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- IEA Clean Coal Centre - UK
- GAC Shipping (India) Pvt Ltd
- Billiton Holdings Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
- OPG Power Generation Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- CNBM International Corporation - China
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
|
| |
| |
|
