South African steam coal prices rise

Tuesday, 21 Feb 2012

Reuters reported that prompt South African physical coal prices rose by around 50 cents on Monday as market participants tried to cover short positions taken at the end of last year amid tight supply for March in particular.

A March South African cargo was bid at USD 108.00 and offered at USD 110.00, up 50 cents on the bid.

An April South African cargo was bid at USD 105.35 and offered earlier at USD 105.90, up 40 cents.

A March DES ARA multi-origin cargo was bid at USD 96.00 and offered at USD 99.00, unchanged.

An April multi-origin cargo was bid at USD 99.00 and offered at USD 100.05, down USD 1.00 on the offer but unchanged on the bid.

Front month South African coal prices FOB Richards Bay have held a premium over subsequent months since January for the same reason and despite weak demand in Europe and Asia.

Players among banks, traders and utilities late last year sold coal swaps and physical in anticipation of being able to buy back at cheaper prices.

Although coal values have been dropping while China has remained out of the spot market, there is still some short-covering, which needs to be done and sellers are reluctant to offer while there's a chance Richards Bay prices will keep ticking higher.

(Sourced from Reuters)

CIL to reduce steam coal E auction to 7pct - Report

Tuesday, 21 Feb 2012

ET, citing government officials, reported that Coal India Limited will gradually reduce spot market sales, called E auction, to 7% of its output by 2015 from the current 10% to make more coal available at cheaper rates to the power sector.

(Sourced from ET)

KEPCO considers overseas coal trading firm by end-2012

Wed Feb 16, 2011

* In talks with foreign partners, local utilities -sources
* Trading firm could be located in Singapore -one source
* To start with coal and expand to LNG and uranium -sources
* Plans for futures trading for risk management -sources
(Adds more details and quotes)
By Cho Mee-young

SEOUL, Feb 16 (Reuters) - Korea Electric Power Corp (KEPCO) , state-run utility in the world's No.3 coal buyer South Korea, aims to set up its first coal trading firm in a move that could give a boost to spot market trading in Asia in the face of surging prices.
The proposed firm, due to be set up by the end of 2012, will be based overseas and will possibly be a joint-venture with foreign partners and local utilities, company and industry sources said on Wednesday.

KEPCO may set up the new trading company in Singapore, one person with knowledge of the matter told Reuters. However, a company source said the location has yet to be decided.
The government and president of South Korea, the world's No.2 liquefied natural gas (LNG) buyer after Japan and No.5 crude oil importer, have been calling for various ways to efficiently secure commodities and energy as global prices rally. The country imports almost all its feedstocks for power generation.

The trading firm may signal a shift from the norm of securing large volumes under long-term contracts to buying via the spot market, as more Asian utilities break away from decades-old fixed-price purchases to a flexible trading model to cope with growing price volatility.
"The firm will procure and trade coal from those overseas mines where KEPCO holds stakes to supply local utilities, as so far there has been no coal trading entity for the utilities," said one company official, who declined to be identified because he was not authorised to talk to the media.

He said that KEPCO is in informal talks with foreign utilities and trading firms to be its partners, although major trading companies were excluded so far.
KEPCO has stakes mainly in coal mines in Australia and Indonesia, its two major suppliers, he added.

HERALDS ACTIVE TRADING

Should more utilities enter spot trading, it could herald growing demand for coal derivative products as power companies seek hedging instruments to manage price risks, traders said.

"We plan to eventually expand the firm's procuring and trading products to other raw materials for power generation including uranium and liquefied natural gas," the KEPCO official said.

"At the initial stage, the firm will focus on physical trading, but in the long term, it may trade futures for risk management if trading volumes expand and supplies diversify."

An Asia-based trade source said the proposed trading firm would enable KEPCO not to rely on tenders and that they could buy coal on the open market more easily.

Reflecting the persistently strong prices, annual negotiations between Australian coal producers and Japanese utilities for thermal coal contracts expected to meet or exceed record levels seen in 2008.

"It will mean more liquidity in Asia," said another source based in Singapore.

"Hopefully, we can see more North Asian companies coming to Singapore to trade. So far, the Koreans are definitely the most aggressive in the spot market."

South Korea has five utilities, which are fully owned by KEPCO -- Korea Midland Power Co Ltd, Korea Western Power Co Ltd, Korea East-West Power Co Ltd, Korea South-East Power Co Ltd and Korea Southern Power Co Ltd. KEPCO also fully owns Korea Hydro & Nuclear Power Co Ltd.

In August 2009, Korea East-West Power Co Ltd and trading company LG Corp considered a joint venture in Australia mainly to procure coal in the spot market, industry sources close to the deal said at that time.

The talks have since collapsed, and KEPCO has leaned toward the plan for a coal trading firm, sources said. (Additional reporting by Rebekah Kebede in PERTH and Fayen Wong in SHANGHAI; Editing by Ramthan Hussain,sourced:routers)

Tags:KEPCO, overseas coal trading firm, South Korean news, coal spot market, Singapore

India close to resuming thermal coal buying - traders

Thursday, 27 January 2011
Indian traders and end-users are close to resuming thermal coal prompt buying after a hiatus of several months, some of India's largest traders said. Coal prices have dropped to around $115.00 a tonne FOB South Africa's Richards Bay from $130.00 in early January and this, combined with plumetting freight rates, has brought an acceptable delivered cost within sight, they said. Indian and Chinese spot buying has been a key price-affecting factor for the past few years because the growth of these markets absorbed what would have been a rising global surplus and left the market finely balanced.

The timing of any rise or fall in demand from India or China can have significant price implications in the international coal spot market."End-users in India were never going to pay $130 plus freight for South African coal but they are close to buying again and they also know they can get Indonesian coal a bit cheaper," said a source at one of India's biggest trade importers.

This spot buying dried up in November and only the severe European weather which boosted coal demand and the disastrous Australian floods pushed prices sharply higher."There was some selling but on a very small scale when prices were high and that's finished now, there are enquiries instead, especially for Indonesian coal," said an Asia-based trader supplying the Indian market.

The price correction since mid-January has not yet been sufficient to draw out Indian buying - end-users have relied on stockpiles instead of fresh imports."Coal prices need to fall another few dollars, maybe $5 would be enough if freights keep going down but consumers are now ready to buy," another major Indian coal trader said."The appetite is there, particularly among the cement companies who prefer South African coal," said an India-based trader for a European firm.

Demand for imported thermal coal in India has not changed despite the lack of recent buying and comments from the Coal Minister suggesting high prices could curb imports, traders said. India's coal deficit will deepen in the next fiscal year to 104 million tonnes, an increase of nearly 24 percent. (Source: Reuters)