(EnergyAsia, May 7 2013, Tuesday) — Singapore Exchange last month launched its South China coal swap contract with 25 lots representing 25,000 metric tons changing hands on the opening day.

The exchange said Straits (Singapore) Pte Ltd and Tullett Prebon Energy Singapore Pte Ltd brokered the first two trades in the API 8 CFR South China coal swap contract.

“With this product and the SGX sub-bituminous coal FOB Indonesia swap, SGX AsiaClear is set to serve the Asian thermal coal swap clearing market, which is expected to grow significantly in the coming years,” said SGX.

The cash settlement price for the contract is calculated from the average of quotes published by IHS McCloskey/Xinhua Infolink South China Marker and Argus media’s 5,500 kcal/kg CFR South China.

API 8 is a trademark used under licence from Argus Media Limited and IHS Global Limited.

In an earlier statement, Argus said the API 8 swaps will help price thermal power coal delivered to south China.

“A swaps market is beginning to emerge in Asia-Pacific for thermal coal services as physical trade expands, fuelled by demand growth in China, India and South Korea. Recent price volatility, triggered by the oversupply of physical coal, has encouraged producers and consumers to consider linkage to published indexes to mitigate price risk. The first swaps to settle against API 8 were traded in August,” said Argus.