Coal futures are traded on several international exchanges, including CME Group, ICE Futures Europe and Zhengzhou Commodity Exchange in China. Contract volumes vary on each exchange, but in general, coal futures have fairly high liquidity and represent significant trading volume.
For traders, trading in coal futures and options is possible on the NYMEX (New York Mercantile Exchange), which is part of the CME Group holding company. There is -
1. Coal Futures (API2) CIF ARA (ARGUS-McCloskey) – the contract serves as the main price reference for delivery and over-the-counter coal contracts in northwestern Europe. Contract code – MTF. This coal is mined in the triangle formed by the cities of Amsterdam-Rotterdam-Antwerp, often called NWE (North-Western Europe) or simply the “Rotterdam” node. Coal quotation includes CIF (cost, insurance and freight) and is calculated in US dollars per ton.
2. Coal futures (API4) FOB Richards Bay (ARGUS-McCloskey), which is the benchmark for coal exports from Richards Bay in South Africa.
3. API 5 is an indicator used to enter into coal supply agreements in the Australian and Chinese markets.
4. Coal futures (API 8) CFR South China (Argus/McCloskey) with the SSI code are the benchmark in the import market of China, the world's largest consumer of coal. This index reflects the cost of coal imported into southern China.
5. ICI 4 Index Futures is the Indonesian Coal Index from Argus/Coalindo, which provides the main benchmark quotes for physical coal shipments in the Indonesian market.
6. ARGUS 8800 PRB (Powder River Basin) – Weekly PRB coal quotes reflect the prices of all physical coal trades in the region for the week. The Argus 8800 PRB quotation is widely used for coal supply and transportation contracts, as well as for transfer pricing. Many mining and power generation companies prefer to use this quote to calculate the cost of physical volumes of coal. The Powder River Basin is the largest coal-producing region in the United States, producing half of the nation's coal used to generate electricity.
FOB means goods for sea delivery.
The seller undertakes the obligation to carry out the customs procedure and load on board the vessel the volume of coal specified by the buyer with delivery to the specified port of shipment at his own expense. Risk and any other costs of delivery pass to the buyer the moment the goods cross the ship.
Argus' coal mining services include daily and weekly international price assessments, market news and commentary.
Argus works with IHS McCloskey to develop API indexes that are industry standard benchmarks. More than 90% of the world's coal derivatives are valued using these indices.
On the ICE Futures Europe exchange, which is part of the Intercontinental Exchange (ICE), in addition to API 2 and API 4, ICE Newcastle Coal futures (NCF) are traded. Quotes are based on the price of coal shipped from the Newcastle Coal Terminal in Australia. Settlement futures, deliverable (EFP), exchange for swaps (EFS) and block trades are available for this contract. Contact volume 1 lot – 1000 tons of coal (same as the minimum transaction volume). The price is calculated in US dollars per ton. The minimum price increment is 5 cents.
The ICE Newcastle Coal futures contract is settled for an amount equal to the monthly average global NEWC globalCOAL index, which is maintained by the largest company for the physical supply of coal. The full methodology for calculating the index is available at www.globalcoal.com.
§ The globalCOAL Monthly Newcastle Index is the average of each Newcastle Weekly Index, calculated every Friday. The Newcastle Weekly Index is a weighted average of two elements: the Weighted Average Transaction Price and the average number of bids and offers. The full methodology for calculating the Index is available on the globalCOAL website.
globalCOAL partners with financial clearing house ICE, which offers a portfolio of coal futures - four contracts for the world's busiest international coal hubs: Newcastle (Australia), Rotterdam (Europe) and Richards Bay (South Africa).
According TheCommodityTower.com there is another similar API4 futures - ICE globalCOAL Richards Bay Coal Futures (contract code - GCF). It is calculated by the RB globalCOAL index, which is calculated from globalCOAL online trading data delivered on FOB contracts. 1 lot = 1000 metric tons.
In doing so, ICE Clear Europe acts as the central counterparty for all these transactions, thereby guaranteeing the financial performance of ICE Futures Europe contracts registered in the name of its members, up to delivery, execution and/or settlement.
Coking coal, a key component of steel production, has become increasingly important from importers as diverse as India, Japan, South Korea and China. It is not surprising that coal futures are also traded in these regions.
The following are traded in dollars on the SGX exchange in Singapore:
1. SGX TSI CFR China Premium JM25 Coking Coal Futures (CCF)
2. SGX IHS McCloskey M42 – Indonesian 4200kc GAR FOB Thermal Coal Futures (M42F)
3. SGX TSI Australia Premium Coking Coal Futures (ACF)
4. Coal India Futures (ZCOA)
Trading hours for the T session are from 7:10 to 20:00 and for the T+1 session from 20:00:01 to 5:15 local time.
In China, on the Zhengzhou Commodity Exchange (ZCE), coal futures are traded with the code ZC (China Thermal Coal Futures), calculated in Chinese yuan. One contract lot contains 100 tons. Trading hours in Beijing are from 9:00-11:30, after a break from 13:30 to 15:00.
In India, COAL India contracts are traded on the Bombay Stock Exchange and Mumbai Stock Exchange of India.
How to make money on coal futures
Ordinary traders who do not want to receive cars with coal at their address trade only in settled futures, where the contract expiration date is constantly automatically postponed to the next nearest one.
A simple example of buying and selling. You can go long one NYMEX contract for a month. Let's say the coal futures rate on the exchange is $34.05 per ton. Each contract on the exchange covers a volume of approximately 907 tons (1,000 tons), so the final contract value will be $30,883. However, it is not necessary to pay the full amount - it is enough to pay the GS (guarantee security). Let's say it is 16% of the total contract value - $4,941.
In a week the situation may change. Let's say the coal futures price rises to $37, then the contract value will be $33,559. By selling the contract at this point, the trader will be able to close out the long position for a profit of $2,676.
This figure is possible due to the relatively low security required to control the large volumes of coal represented in the contract.
Shares of coal companies
The price of coal futures on the stock exchange can affect the shares of companies involved in the extraction, processing and transportation of solid fuels.
If trading futures contracts makes it difficult to enter the market, then buying shares of companies is an easier way.
The main players in the coal market are Chinese, Indian and American giant companies.
§ BHP Group Limited (BHP) is an international mining company that mines metals and coal in various regions of the world. BHP shares are traded on stock exchanges in the US, UK, Australia and other countries.
§ Rio Tinto Group (RIO) is an international mining company engaged in the extraction of various minerals, including coal, iron ore, copper, aluminum, etc. Rio Tinto shares are traded on stock exchanges in the US, UK, Australia and other countries.
§ Peabody Energy Corporation (BTU) is the largest coal producer in the United States. The company mines, produces and sells coal in various regions of the United States and Australia. Peabody Energy shares are traded on stock exchanges in the United States.
§ Arch Resources, Inc. (ARCH) is another large coal producer in the United States that mines and sells metallurgical and thermal coal. Arch Resources shares are traded on stock exchanges in the United States.
§ China Shenhua Energy Company Limited (CSUAY) is the largest company in China engaged in coal mining and production. The company is also involved in coal-fired power generation. China Shenhua Energy shares are traded on stock exchanges in Hong Kong and Shanghai.
§ Coal India Limited (COALINDIA) is the largest coal producer in India, engaged in the extraction and sale of coal in the domestic and international markets. Coal India shares are traded on stock exchanges in India.
§ Adani Enterprises Limited (ADANIENT) is a coal mining and production company in India and also has various other businesses including coal export terminals, solar energy, etc. Shares of Adani Enterprises are traded on stock exchanges in India.
§ Yanzhou Coal Mining Company Limited (YZCAY) is one of the largest coal mining companies in China, which mines, produces and sells coal in China and other regions of the world. Yanzhou Coal Mining shares are traded on stock exchanges in the US and Hong Kong.
§ CONSOL Energy Inc. (CEIX) is an American company engaged in the extraction, production and sale of thermal and metallurgical coal in the United States.
§ Westmoreland Coal Company is an American company engaged in the extraction and sale of thermal coal in various regions of the United States. Shares of Westmoreland Coal Company are not currently traded on any stock exchanges.
§ New Hope Corporation Limited (OTCMKTS:NHPEF) is an Australian company founded in 1952 and headquartered in Brisbane. The firm has coal mining projects across Australia.
§ NACCO Industries, Inc. (NYSE: NC) is an American company founded in 1913 and headquartered in Cleveland, Ohio. The firm operates coal mines to produce electricity, with mining sites located in Texas, Mississippi, North Dakota and New Mexico. The company also leases its mineral rights to other entities.
§ Alliance Resource Partners, LP (NASDAQ:ARLP) is an American diversified natural resources company based in Tulsa, Oklahoma. The company mines mineral resources in Kentucky, Maryland, West Virginia and other states of America.
§ PJSC "Raspadskaya" – RASP.MM
§ EvrazHolding LLC – EVRAZ
§ Exxaro – EXXJ
§ Anmol India Ltd – ANMI
§ Sindhu Trade Links Ltd – SINU
§ Jizhong Energy – 000937
§ Peabody Energy - BTU
§ Shaanxi Coal and Chemical Industry – 601225
§ Shanxi Coking Coal Group – 600740
§ Cliffs Natural Resources - CLV
