Global Coal and Ocean Freight
Belbridge Consulting offer a range of business consultancy services tailored to firms trading within the global coal and ocean freight markets.
Coal continues to be widely traded for use as a fuel, despite moves toward cleaner burning non-fossil fuels. Indeed much effort has been expended finding ways to remove sulphur from coal in order to allow it to burn cleaner, rather than moving away from coal as a reliable energy source.
Coal is traded globally, with physical production primarily being sourced from South Africa, Australia, and the Americas. The price of coal is normally traded as a differential to a benchmark;
- API 2 for Coal imported into North West Europe
- API 3 for an average of FOB Richards Bay and South Africa 5,500 coal
- API 4 for Coal exported out of Richards Bay, South Africa
- API 5 for 5,500 Coal exported out of Newcastle, Australia
- API 6 for 6,000 Coal exported out of Newcastle, Australia
- API 8 for 5,500 Coal imported into South China
- API 10 for an average of FOB Puerto Bolivar 6,000 coal
- API 12 for 5,500 Coal imported into East India
Coal produced in the US (Central and Northern Appalachia, Illinois Basin, Powder River Basin, Uinta Basin) is traded through mercantile exchanges, which often provide a reference price against which differentials can be traded.
Coal is naturally occurring, so is not uniform in its composition. The physical properties of a coal blend are a key component in its eventual selling price. The sulphur content, pellet size, moisture, calorific value, etc. are all data items that need to be captured on inspection surveys during the trade lifecycle.
Marine freight can vary depending upon the volume and type of cargo a vessel is required to carry and the route required.
In its simplest terms, marine fright can be broken down into the following types;
Dry Bulk – vessels designed for transporting dry goods in bulk (coal, iron ore, grain).
Dirty Tankers – vessels designed for transporting unrefined crude oil.
Clean Tankers – vessels designed for transporting refined oil products (gasoline, fuel oil).
LNG Carriers – vessels designed for transporting liquefied natural gas (LNG).
Containers – vessels designed for transporting containerised goods.
Vessels may be owned by a firm and used to transport their own goods, but equally a firm may engage in chartering vessels in from an owner under a ‘head fixture’. This effectively sets a $/day rate for the hire of a vessel, along with some set operating costs. The charterer is then able to utilise that vessel to perform voyages to load and unload goods between load and discharge ports.
Alternatively, a firm may elect to pay a ship owner for a specific voyage under a ‘voyage charter’, in which a freight rate is agreed based on the cargo to be transported.
Freight is a very expensive but necessary part of the supply chain for global products. Much care is needed when operating marine freight, as unexpected delays can very quickly cost many hundreds of thousands of dollars.
How we can help
Whether it is helping to configure new markets into your existing CTRM system, or whether it’s an initial assessment of the functionality required to commence trading in a new commodity or area, Belbridge Consulting can provide you with expert guidance gained from many years of hands-on experience in these complex markets.
By utilising our knowledge and expertise to supplement your internal project teams, you can be assured that your business and technology teams are able to both understand the needs and the pitfalls of these markets but also to translate the abstract terms into real meaningful requirements that are unique to your firm and its operational processes.
A solid understanding of how these commodity markets will truly affect the day to day trading and operational processes within your firm will ensure that your project team has the best possible information in order to deliver the right solutions and to allow your firm to extend its trading footprint without creating undue operational breaks and manual exception processing.