Trade in international physical steam coal is expected to exceed 500 million tonnes this year and swaps business will top 750 million tonnes, equating to a total value of more than $80 billion. The new products offered by EEX will help participants in the coal market solve an urgent problem caused by the rapid growth in volumes. Coal traders’ bilateral credit lines are becoming exhausted and exchange traded futures will enable them to eliminate counterparty risk. Clearing allows flexibility in trading as well as secu-rity in the settlement of transactions.
EEX coal futures will be settled against the API 2 (Amsterdam/Rotterdam/Antwerp) and API 4 (Richards Bay, South Africa) indexes as published in Argus/McCloskey’s Coal Price Index Report. The indexes are calculated using assessments from Argus, Barlow Jonker and McCloskey. The coal contracts are quoted and cleared in US dollars, the first time that non Euro denominated trading and clearing have taken place at EEX .
“The widening of EEX’s product range to include coal is a natural extension of our business and enables market participants to enter the energy value chain at an earlier stage” said Dr. Hans-Bernd Menzel, CEO of EEX.
Adrian Binks, CEO of Argus said “We wish the EEX well with their launch of coal fu-tures and are pleased that they have decided to use the standard industry benchmark as a settlement price”.
Gerard McCloskey, Chairman of the McCloskey Coal Group said “Coal is immense with a vast reserve and very very competitive price levels. Advances in technology are smacking down on the pollution that coal has caused in the past. What the industry has needed is sophisticated market implements to match all this. The agreement we have reached with EEX takes a huge stride over this threshhold. It is overdue and extremely welcome”.
