All coal deals are coming under review

THE GLOBAL thermal coal industry is facing the biggest shake-up of its pricing benchmarks after Argus and IHS McCloskey, the dominant price providers, proposed changes to their assessments.

The world’s top three coal indices, which help inform short- and long-term deals struck between coal producers, traders and end-users, are all under review.

Earlier this year, price spikes in South Africa’s Richards Bay and Australia’s Newcastle markets caused concern that prices could be higher than fundamentals justified. Traders said at the time that there had been some high bids placed at short notice which few sellers could meet. As the market is not particularly liquid, bids and offers help inform pricing on the indices.

In response to the concerns, consultations have drawn feedback on proposed changes to the API 2 benchmark for northern European coal markets and the API 4 South African coal benchmark, the worlds’ first and third largest coal indices.

The indices are calculated using data gathered by Argus and IHS McCloskey.

“Price rises in the Richards Bay and Newcastle markets this year were at times not reflective of the supply and demand situation in either mar- upon. This is one of instances.”

Trading platform globalCOAL was also discussing narrowing the three-month timeframe used for prices on its Newcastle benchmark index with market members, although it had not launched a formal consultation, said chief executive Eoghan Cunningham.

“We’re keeping it under review and later in the year we’ll make an assessment,” Cunningham said.

GlobalCOAL’s Newcastle benchmark index for thermal coal in the Asia-Pacific area is the world’s second largest coal index. Earlier this year globalCOAL made changes to South Africa’s Richards Bay market after complaints about high bids for unusual tonnages.

The world’s top physical coal broker stipulated that bids, offers and trades of physical coal at Richards Bay would be limited to multiples of 25 000 tons, after a jump in the number of buyers looking for non-standard tonnages

IHS McCloskey’s consultation also proposed to introduce a minimum cargo size of 50 000 tons for the Richards Bay API 4 index and that trades not in 25 000-ton multiples would by it could be validated that they are in the market, within the bid/offer range for example, Howland said.

Argus’ consultation does not include proposals related to cargo size. – Reuters

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