RMB launches direct coal vehicle on JSE

The launch of RMB’s second commodity exchange-traded note means people can invest directly into coal.

ALISTAIR ANDERSON
May5, 2011

JSE investors can now put their money directly into coal rather than listed coal mining companies following the launch of Rand Merchant Bank ’s (RMB’s) second commodity exchange-traded note, RMB Coal ETN, which starts trading today.

Its JSE ticker will be "colrmb", joining RMB’s oil exchange- traded note "oilrmb".

RMB’s two commodities- backed products join Standard Bank ’s range of gold, silver and platinum exchange traded notes and Absa Capital’s NewGold exchange-traded fund. Exchange- traded notes differ from exchange-traded funds in that they own futures contracts rather than the underlying commodity.

"Until now, coal exchange- traded products across the globe have only invested in companies linked to coal mining, equipment or transportation and have not offered a direct investment into coal via physical coal or coal futures," RMB spokeswoman Vicki Goodwin said yesterday. The coal ETN invests in the Richards Bay Coal Futures contract which traded on ICE, the electronic trading platform for commodity, currency, credit and equity index markets. A single unit will give an investor exposure to one ton of coal, making the product more accessible and easier to invest in than directly into a futures contract, which typically trades at 5000 tons of coal.

The Richards Bay Coal Terminal is the world’s largest coal export facility. The majority of SA’s export coal is sent through the terminal located on the KwaZulu-Natal east coast.

SA has 3,7% of the world’s reserves, with 4% of global production. It is the largest producer of coal in Africa and one of the world’s top 10 producers.

Huge demand for energy resources in China and India have pushed the price of thermal coal to record levels. The price was under upward pressure this year from Australia’s floods and the earthquake in Japan. (sourced Business Day)