Asian coal market develops with Australian (API 5) over-the-counter coal swap
Singapore, 18 January 2013
The first swap deal based on the Australian API 5 coal index has been transacted, global energy and commodity price reporting agency Argus announced today.
The over-the-counter deal was brokered by Marex Spectron and involved Standard Bank as one of the counterparties.
The API 5 index represents 5,500 kcal/kg NAR high-ash coal shipped from Australia and, together with the API 8 index representing the same quality coal shipped to China, is the most closely watched coal assessment in Asia. Growing interest in API 5 and API 8 has been driven by the strong rise in coal demand from China and India in recent years. Australian mining firms increased production from mid-2011 amid growing demand from Chinese, South Korean and Taiwanese buyers.
The API 5 index was launched jointly by Argus and IHS McCloskey Coal at the start of May 2012 and has quickly gained the confidence of the coal trading community as a reliable, independent price assessment. A two-year term physical contract for coal deliveries linked to API 5 was signed in November. Argus and IHS McCloskey Coal also publish the successful API 8 coal index for deliveries of steam coal to south China.
“With physical deals being regularly quoted on the API 5 index it is very encouraging to see the API 5 swaps trade. The opportunity to trade the implied freight between API 5 and API 8 is generating a lot of interest,” said Oliver Haines from Marex Spectron.
“This is another small but significant step in the evolution of the Asian coal market and we are pleased to be able to participate in the ongoing commoditisation of coal. Coal indexation and the accompanying risk management tools such as these swaps contracts provide producers, end-users and other market participants with more flexibility in their respective businesses,” said Ivan van Niekerk, the head of coking and thermal coal at Standard Bank.
Argus chairman and chief executive Adrian Binks said: “We are delighted to hear that the Argus/IHS McCloskey API 5 index has been recognised and used for risk management by market participants.”
Argus and IHS McCloskey Coal publish a series of API indexes, which are used for 90pc of the world’s internationally traded coal derivatives..
The methodologies used to derive the Argus and IHS McCloskey prices are available online at www.argusmedia.com/methodology and reference and www.mccloskeycoal.com.
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About Argus Media
Argus is an independent media organisation with nearly 500 full-time staff. It is headquartered in London and has offices in each of the world’s principal energy centres. Its main activities comprise publishing market reports containing price assessments, market commentary and news, and business intelligence reports that analyse market and industry trends.
More than half of Argus’ staff are commodity journalists who specialise in reporting news and price information relating to physical energy and related commodity markets. They operate according to a rigorous Editorial Code of Conduct and an Ethics Policy that align with best journalistic practice, including the avoidance of conflicts of interest.
Argus is a leading provider of data on prices and fundamentals, news, analysis, consultancy services and conferences for the global crude, oil products, natural gas, electricity, coal, emissions, bioenergy, fertilizer, petrochemical and transportation industries. Data provided by Argus are widely used for indexation of physical trade. Companies, governments and international agencies also use Argus information for analysis and planning purposes.
Argus has 19 offices globally, including London, Houston, Washington, New York, Calgary, Rio de Janeiro, Singapore, Dubai, Beijing, Tokyo, Sydney, Moscow, Astana and other key centres of the energy industry. Argus was founded in 1970 and is a privately held UK-registered company.