The extension of SGX’s OTC clearing service to the Asian coal market offers traders and physical players an effective risk management tool to support the trade.
The contract will be cash-settled against the IHS McCloskey Indonesian Sub-Bituminous FOB marker published by IHS Global Limited. The size of each contract is equivalent to 1,000 metric tonnes of physical sub-bituminous coal from Indonesia, which is used mostly for steam-electric power generation.
Jeremy Ang, SGX’s commodities executive director, said:
“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. This adds to the extensive list of OTC contracts SGX is already clearing.”
John Howland, Publisher of IHS McCloskey, said:
“We are delighted that SGX is clearing the contract which settles against the IHS McCloskey Indonesian Sub-Bituminous FOB marker. 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.”
Indonesia is the world’s leading exporter of thermal coal, supplying more than 230 million tonnes a year. More than 70% of its coal exports end up in Asia.