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Argus and IHS McCloskey launch new API 3 coal index

Commodities news and price reporting agency Argus and business information provider IHS (NYSE: IHS) have introduced an API 3 price assessment for 5,500 kcal/kg NAR fob Richards Bay coal in Argus/McCloskey's Coal Price Index Report.

Rapidly growing Asia-Pacific demand and additional alternative supply in the Atlantic basin have seen South African coal producers increasingly look eastwards to place their cargoes. This trend has been reinforced by the emergence of sustained trade in lower quality coals. Most shipments of high-ash, 5,500 kcal/kg NAR coal from Richards Bay are likely to continue to head for China and India.

Argus and IHS McCloskey Coal are seeing increasing interest in their 5,500 kcal/kg API 5 and API 8 indexes, pricing fob Australia exports and south China imports, respectively. The addition of API 3 to this suite of 5,500 kcal/kg Asia-Pacific indexes should encourage arbitrage between competing regional production centres and the key Chinese import market, and simplify hedging.

The new API 3 index can be used as an outright reference for a lower grade of South African coal, or as a gauge for calculating the appropriate discount against the 6,000 kcal/kg API 4 price.

"Richards Bay export product has changed radically over the last four years, with Indian buyers in particular demanding a lower calorific value product," IHS Coal publisher John Howland said. "The launch of the API 3 index is in response to the gravitational pull eastwards for Richards Bay coal of this quality and is complementary to the existing delivered markets in China and India."

Argus Media chairman and chief executive Adrian Binks said: "As Asia-Pacific coal markets continue to grow and export patterns from Richards Bay change, the importance of a reliable price indicator for South African lower-grade coal increases. We are pleased to facilitate the arbitrage opportunities for 5,500 kcal/kg coal in Asia with the launch of API 3 to complement the existing API 5 and API 8 indexes."

The weekly API 3 index is the average of the weekly Argus fob Richards Bay 5,500 kcal/kg NAR assessment and the weekly IHS McCloskey South African 5,500 kcal/kg NAR fob marker, both published each Friday. The API 3 index uses the same robust methodology of combining a volume-weighted average of deals done and a market survey element that has won market trust for the other API indexes. All API indexes are calculated by averaging the relevant Argus and IHS McCloskey price assessments.

This index is assessed in Asian time with a cut-off point of 18:30 Singapore time on Friday for trades and survey numbers to be accepted for inclusion in the formation of the index. This equates to 10:30 GMT in London.

Argus and IHS McCloskey publish seven thermal coal API indexes and one coking coal API index (API C1), including key price benchmarks API 2 and API 4. These indexes provide the settlement basis for around 90pc of total trade in global coal derivatives

Source: PRNewswire