ICMA proposes coal price index

Indonesian Coal Mining association (ICMA) is proposing the formation of Indonesian Coal Index (ICI) as a benchmark for Indonesian coal prices, which is believed to better reflect the value of Indonesian coal, the association chairman said.

ICMA chairman Jeffrey Muljono said that the index is expected to become operational early next year.

?Indonesia is in the process of becoming world?s largest thermal coal exporter, it is high time that Indonesia has an index that can be used as reference by producers and buyers,? he said.

ICMA, according to Jeffrey, would set up a company whose shareholders would consist of Indonesian coal producers and other relevant stakeholders such as Globalcoal and Argus, which have expertise in managing the index. Producers would then regularly supply price and volume transaction data to the company, which will be use as input for ICI.

Separately, a senior official at Bumi Resources Kazuya Tanaka in its presentation at CoalTrans in Nusa Dua late Tuesday said that ICI would better reflect the real Indonesian commodity prices compared to other indices that are plagued by conjecture, market rumors, thin liquidity and broad range of coal qualities.

Tanaka, who is also an advisor to ICMA, said that the formation of ICI give benefits such as introducing objectivity to price setting process; promoting independent market valuation, more cost efficient than the-often-lengthy traditional negotiating process; providing starting point for negotiations; allocating resources more efficiently and facilitating risk management.

Tanaka went on to say that in order for the index to gain acceptance, ICI must involve as many market participants as possible; derive at least 3 price indices to capture Indonesia?s diverse product specification, have independent collation, reporting and based on actual transactions of the sponsors.

He further said that an ideal price index must be based on actual transaction values, well-defined qualities and quantities of coal, standard delivery periods, sufficient event frequency and sufficient liquidity.

?Index data must be truly representative of the bulk of business being executed, independently gathered, verified and sorted, reported in timely manner, regularly audited and offer confidentiality and anonymity to supporters,? he said.

Indonesian coal producers had long been using platforms published by Barlow Jonker, Argus, GlobalCoal and price settlement of Australian producers and Japanese buyers as basis of their price negotiation with buyers. (alex)

The ICI Coal Categories (Proposed)
		Nominal Specification	Acceptable Range
ICI -1
High CV bituminous coal	CV Kcal/kg gar	6500	6250-6850
	TM % gar	11.0	10.0-12.0
	Ash % gad	6.0	4.0-12.0
	TS % gad	0.75	0.60-0.90
ICI - 2
Mid CV bituminous coal	CV Kcal/kg gar	5800	5700-6150
	TM % gar	13.0	12.0-18.0
	Ash % gad	6.0	3.0-12.0
	TS % gad	0.70	0.60-0.80
ICI - 3
Sub - bituminous coal	CV Kcal/kg gar	5000	4500-5600
	TM % gar	25.0	18.0-30.0
	Ash % gad	3.0	1.0-5.0
	TS % gad	0.35	0.10-0.80

Basis for ICI Indices (Proposed)
* Origin:	Kalimantan
* Vessel Size & Type :	Ocean Going Vessels, panamax or handy
* Consumer :	Export post buyer, power utilities
* Price Basis :	US$FOB with L/C payment
* Loading Rate :	Panamax 12,000 MT WWD SHINC, Handy 10,000 MT WWD SHINC
* Tonnage :	Full Shipment, one port load with delivery within 6 months of settlement
* Buying Method:	Tenders, restricted tenders, direct negotiations, etc.
* Qualities:	as stated earlier