Singapore Exchange (SGX) announced it has successfully launched clearing of the over-the-counter (OTC) Indonesian Sub-Bituminous Coal Swap contract on November 3, 2010.
Brokered by Ginga Petroleum, the first trade- with a contract value of US$1.2 million – was done between Mercuria Energy Trading and RWE Supply & Trading.
Jeremy Ang, Executive Director, Commodities at SGX said, “Given the keen interest in this contract and active participation by industry players thus far, we are optimistic about the growth potential of this clearing service.”
SGX OTC Indonesian Coal Swap is based on sub-bituminous coal from Indonesia with base calorific value of 4900 kcal/kg NAR. Each contract is equivalent to an exposure of 1000 s of physical sub-bituminous coal FOB Indonesia. The contract will be cash-settled using the arithmetic average of all publications of HIS McCloskey Indonesian Sub-Bituminous FOB marker in the expiring month. SGX is the first exchange in the world to clear over-the-counter (OTC) Indonesian Sub-Bituminous Coal Swap.
According to SGX website the service will enable coal producers to use OTC coal swap to secure long term sales price to lock-in revenue, while electricity generators and other end users of coal will be able to use it to lock-in their input cost. Coal traders will also benefit from it as it allows them to protect their coal inventory against possible fall in coal prizes. With OTC coal swap, market participants will be able to neutralize coal price volatility, giving them the certainty and stability needed to enable them to focus on growing their business, it said.
Another benefit of the service is counterparty credit risk mitigation. By bringing the OTC Coal Swap contract into SGX for clearing, uncertainties surrounding the credit-worthiness of trading counterparties can be mitigated as SGX becomes the central counterparty to both the buyer and seller.
“This new service is aimed at meeting the needs of price and counterparty risk management in the growing OTC coal swap market. Participants will gain access to an expanding and readily available pool of counterparties on SGX,” Ang said.
“This is a transaction based index that marks the price of coal within clearly established parameters based on coal specification and vessel loading capacity, making it truly reflective of actual prices for this quality of coal. We are confident that clearing will help increase liquidity in this growing market.” John Howland, Publisher, HIS McCloskey said.
Indonesia is the world’s top exportrt of thermal coal with an annual export volume of over 230 million metric tones, which accounts for 31% of world’s total export. More than 70% of this exported to Asia to satisfy growing demand.
Contract Specifications
Product name | SGX OTC Sub-Bituminous Coal FOB Indonesia Swap |
Contract Size | 1 lot = 1000 metric tonnes |
Ticker symbol | CI |
Minimum price fluctuation | US$0.01 per tone (US$10.00) |
Contract months | Up to 24 consecutive month starting current month, 12 consecutive months will be added upon expiry in December |
Trade Registration hours (Singapore Time) | 8.00am-4.00am Last trading day : 8.00am-8.00pm Note: System is not available from 4.00.01am to 7.59.59am daily |
Last trading day | Last publication day (Friday) of the HIS McCloskey Indonesian Sub-Bituminous FOB marker in the contract month |
Final settlement price | Cash settlement using the arithmetric average of all publication of HIS McCloskey Sub-Bituminous FOB Marker in the expiring month, rounded to 2 decimal places |
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