IHS McCloskey Indonesia Coal Swap volumes soar

Trades in Indonesian coal swaps settled against the IHS McCloskey Indonesian Sub-Bituminous FOB marker, published by information and analysis provider IHS Inc., have soared to more than one million tonnes this year, as the index has become rapidly accepted as a key benchmark for the world's top thermal coal exporter.

On the back of this success, IHS McCloskey launched last month the South China CFR marker, which has attracted considerable industry interest with a growing number of companies looking to trade swaps against it.

"The rapid take-up of these price benchmarks reflects rapidly expanding demand for financial products from coal buyers and sellers in Asia, but also the depth of expertise and unrivalled credibility and reputation that IHS McCloskey enjoys in the international coal market," said Scott Key, IHS president and chief operating officer.

The Indonesian swaps first traded in January 2010 through broker Ginga Petroleum. Volumes rose significantly in November 2010 when the Singapore Exchange (SGX) launched clearing services for it, quickly followed by the Chicago Mercantile Exchange and the Intercontinental Exchange. Trade rose to 250,000t -- 300,000t per month in May 2011, which coincided with Marex Spectron starting to offer these swaps as part of its brokerage services in Singapore. Following on from breaching the one million tonne mark, last Friday, July 15, 2011, saw the largest volume of Indonesian swaps trade with 165,000t going through in one day.

Following the growth in volumes on the Indonesian swaps, the South China CFR marker and its methodology have attracted considerable interest and it has recently been added to Marex Spectron's Asian coal broking portfolio.

The South China CFR marker is compiled in association with Xinhua Infolink using the IHS McCloskey Coal Marker Price Methodology. The marker focuses on the price of imports into the South China market. However, as the marker assesses the most competitive traded spot tonne, Chinese domestic prices (excluding tax) provide the basis for the IHS McCloskey/Xinhua Infolink marker when international prices are higher than Chinese domestic prices and China stops importing.

The domestic coastal trade between north and south China is around the same volume as the entire international seaborne steam coal market. The attractiveness of international coal to Chinese buyers is largely dependent on domestic CFR prices. When Chinese domestic prices are lower than international prices, buyers focus on the purchase of domestic spot material.

Marex Spectron, has become the first broker to offer coverage of the Chinese coal swaps market. CFR China 5,500 grade swaps are now tradable via Marex Spectron's live trading screen or through its voice brokering team. The swaps are settled against IHS McCloskey/Xinhua Infolink South China CFR (5,500kc NAR) marker.(alex)