james o'connell platts coal bangkok 2012
TRANSCRIPT
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Coal Trading in Asia
Bangkok, November2012
James OConnellPlatts
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Over 100 years of facilitating efficient and transparentmarkets
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Our Profile
Platts is the worlds largest energy information provider
Platts brings transparency to the markets through spot
prices and published assessment methodology
Every month, more than US$10 billion in trading activityand term contract sales are based on Platts benchmarks
Platts provides in-depth analysis on market breakingnews, helping our subscribers to make business decisions
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Platts: part of the McGraw-Hill Companies
platt
s
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Presentation overview
International trading platforms
Role of indices in market transparency
Rising production costs & volatile international prices
Is coal buying strategy changing in Asia ie short termcontracts versus long term arrangements
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globalCOAL NEWC Index what is it?
An index based on the spot (prompt 3 months) price for thermalcoal delivered on an FOB basis in Newcastle, NSW, Australia,basis 6,000Kcal/Kg NCV NAR
globalCOAL NEWC Index used for settling ICE Futures Europefutures contract and OTC derivatives in Asia. Approx 250 million
tonnes traded in 2011. Widely used benchmark reference point for Asian coal and
underpins the vast majority of index linked physical coal salescontracts in Asia.
17th June 2012
1 hour trading window introduced: Encourage market to post all bids & offers between 08.00 09.00 London time
Designed to increase participation during Asian hours
Price collar introduced: To safeguard against human error and potential market distortion
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Volume and frequency of Phys NEWC tradesincrease since window
Size denotesTransaction Volume
60
70
80
90
100
110
120
130
23-Dec 11-Feb 1-Apr 21-May 10-Jul 29-Aug 18-Oct 7-Dec
PriceU
S$
Source: globalCOAL
NEWC TradingWindow Introduced
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0
10
20
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40
50
60
70
80
90
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3-Jan 3-Feb 3-Mar 3-Apr 3-May 3-Jun 3-Jul 3-Aug 3-Sep 3-Oct 3-Nov
Numberofbids&offers
# of Bids & Offers
Volume of Index qualifying Phys NEWC bids& offers increases post window
Source: globalCOAL
NEWC TradingWindowIntroduced
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Value: a function of time
Drop of $3.20/barrel(or $22.50/mt)
in 40 minutes
M
O
C
4.02.00pm: After Brent fall s $1 in 3
minutes (33 cents a minute for three
minutes) Platts crude, products and
aromatics editors all ra iseincrementability to $2/mt or 20
cents/barrel per minute: eWindow,
manual processes and headlines all
move at same time
4.27.00pm: Fall slows and prices
rise moderately. Platts crude,
products and a romatics editors
reinstate incrementability at
$1/mt or 10 cents/barrel per
minute: eWindow, manual
processes and headlines all
move at same time
Brent futures during Platts Asia MOC May 25, 2008
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Windows, e-Windows have standard increment guidelines
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MOC: Increments and Repeatability in action
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Window makes the market transparent
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Platts eWindow screenshot Market on Close (MOC)
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Windows participation is subject to vetting procedures
Business profile (history, registration, ownership, documents ofincorporation etc.)
Financial standing
Creditworthiness (bank references and credit lines, or evidence ofability to issue LC against first class bank in the absence of credit
lines Market reputability
Trade performance history
Counterparty acceptance
Adherence to Platts Editorial guidelines
Adherence to operational and logistical market standards (forbest endeavor basis performance)
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Coal cash costs by country 2011
. Thermal Coal: cash costs of production , by country
US$/t fob
50th centile 38.6
75th centile 48.1
90th centile 59.6
spot 72
-10
10
30
50
70
90
110
130
150
0 100 200 300 400 500
cashcostofproduction
(US$/tfob).
cumulative production (Mt)
50th 75th90th spot: 7-Sep-122011 cash cost curve
Indonesia
Australia
South
Africa
Colombia
Shanxi cash costs 2011$46/mt
FOB Kalimantan5,900 - $70.25/mt
5,000 - $55/mt4,200 - $38.40/mt
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Volatility in Asian coal prices since 2002
Qinhuangdao - RedNewcastle 6000 - BlackRichards Bay 6000 - Green
Kalimantan 5900 - BlueNewcastle 5500 - Pink
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Kalimantan and Newcastle relationship?
FOB Kalimantan5,900 - $70.25/mt5,000 - $55.00/mt4,200 - $38.40/mt
Newcastle 6,000Newcastle 5,500Japan strike dealFeb 7 - $21/mt spreadMar 13 - $11.65/mt
Jun 15 - $4.20/mt
Aug 14 - $22.10/mt
4,200 GAR steady in
$38-42/mt range
5,000 GAR in $70-78.30/mt range
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Platts FOB Newcastle 5500 Vs 6300 GAR
Newcastle 5500 NAR vs. Newcastle 6300 GAR
85
90
95
00
05
10
15
20
25
30
1-
Aug-
11
8-
Aug-
11
15-
Aug-
11
22-
Aug-
11
29-
Aug-
11
5-
Sep-
11
12-
Sep-
11
19-
Sep-
11
26-
Sep-
11
3-
Oct-
11
10-
Oct-
11
17-
Oct-
11
24-
Oct-
11
31-
Oct-
11
7-
Nov-
11
14-
Nov-
11
21-
Nov-
11
28-
Nov-
11
5-
Dec-
11
12-
Dec-
11
19-
Dec-
11
26-
Dec-
11
Platts Newcastle 5500 NAR Platts Newcastle 6300 GAR
$20.25
$15.25
$19.90
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Newcastle 5500 NAR vs 6300 GAR
Japan annual talks
$23.45/mtspread
Japan utilities strike deal
March 13 - $11.45/mt
spread
Octoberterm deal
June 15 - $7.50/mtspread
June 26$16.95/mtspread
June term talks
August 9$22/mt spread
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Asian benchmark???
.
0
1
2
3
4
5
6
7
8
9
10
2009 2010 2011 2012proj
Mt
Physical New castle trades
-58%YoY
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Long-term pricing systems are inefficient
The benchmark system of annual contract setting leads to hugeprice distortions
Large annual rises / falls in price have a dramatic effect on balancebooks downstream, and on bilateral relationships
Since annual contracts dont reflect market value throughout theyear, price takers and givers take on board significant market risk
Term contracts which price off daily spot prices would enable
consumers to accurately hedge with financial derivatives
This is a natural trend observed in oil, gas, petchems, steel andthermal coal markets already
S t i h l t d ith t l t t
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Spot prices have correlated with quarterly contractsettlements
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Utilities adopt the short term tender: CTI Aug 14
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Kosep late July tender for September delivery
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Kospo spot tender (CTI Sep 13)
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FOB Kalimantan 4,200 GAR
.
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Platts FOB Newcastle 5500 NAR
1
2
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Platts response to import trends
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Platts FOB Newcastle 5500 NAR ash differential
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Friday, October 19, 2012
Ash differential per 1% ash = $0.62
17% ash = $71.50/mt + ash differential = $73.36/mt
18% ash = $71.50/mt + ash differential = $72.74/mt
19% ash = $71.50/mt + ash differential = $72.12/mt
Newcastle 5500 20% ash = $71.50/mt
21% ash = $71.50/mt - ash differential = $70.88/mt
22% ash = $71.50/mt - ash differential = $70.26/mt
23% ash = $71.50/mt - ash differential = $69.64/mt
FOB Newcastle 5500 NAR 17-23% ash
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Tuesday, October 19, 2012
FOB Newcastle 5,500 NAR 20% ash = $71.50/mtAsh differential per 1% ash = $0.62
Ash normalization process:5,700 NAR 20% ash is $74.10/mt ($71.50 / 5500 X 5700)
19% ash = $74.10/mt + ash differential = $74.72/mt
18% ash = $74.10/mt + ash differential = $75.34/mt
17% ash = $74.10/mt + ash differential = $75.96/mt
FOB Newcastle 5500 NAR (5300-5700)
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Indonesian exports to China (to Sept 2012 YoY)
.
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Lignite Steam Other coal
2012
2011
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China thermal imports to July 2012
Indonesia
32%
Australia
37%
Colombia
3%USA
5%Canada
1%
Russia
9%
South Africa
13%
Other
23%
China thermal imports to July
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Republic of Koreas 2011 Total Imports by Country
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Richards Bay Coal Terminal 2012 exports
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Richards Bay exports to Sep 2012 (million mt)
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Meet the Coal team at Platts
James OConnell, Editor in Chief
Michael Cooper - Editor, Australia
Cecilia Quiambao, Associate Editor,Indonesia & North Asia
Deepak Kannan, Associate Editor
Indonesia & Freight Reggie Le, Associate Editor - China
Sapna Dogra, Assistant Editor - India
Gareth Carpenter, Team Leader,Europe
Jacqueline Holman, Associate Editor,Europe Jaime Concha, Associate Editor,
Europe
Regional correspondents Chris Bishop, South Africa
Toby Muse, Colombia
Chris Kraul, Colombia
Anita Nugraha, Indonesia
Sunil Saraf, India Jayanta Sarkar, India
Sarah Cottle, Editorial Director EMEA
Vandana Hari, Asia Editorial Director
Larry Foster, Editorial Director, Global Power
Jorge Montepeque, Global Editorial Director,Price Group
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James OConnell,
Editor-in-Chief,Platts Coal Trader International
Platts International Coal [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]