Platts is publishing the first ever Northeast Asia thermal coal price assessment, or Platts NEAT, a daily 15-60 day forward calculated price for seaborne thermal coal exported out of various origins typically shipped to the Northeast Asia region.
Platts NEAT reflects the value of 5,750 kcal/kg NAR coal, delivered on a Panamax vessel to the basis port of Kinuura in Japan in the forward 15-60 days. This price provides thermal coal producers, power producers, cement manufacturers, coal traders and ship brokers with an independent, transparent source of open-marker spot prices for higher-grade thermal coal shipped to Japan, South Korea and Taiwan.
Platts NEAT is available in these Platts services: Platts Coal Trader International and fixed pages GC0410 and GC0425.
The Platts NEAT is important as it anticipates a shift in spot market trading from an FOB to a CFR basis.
Japan, South Korea and Taiwan are expected to remain significant consumers of thermal coal in the foreseeable future as these countries do not have their own indigenous production and coal is expected to account for a significant part of their energy mix.
While there have been several concerns raised about the restart of nuclear power plants in Japan, South Korea and Taiwan, they have yet to adopt cleaner fuels enough to displace coal significantly from the energy mix.
Platts is also publishing the first ever Newcastle to Kinuura Panamax dry bulk freight rate, which is used in the calculation of Platts NEAT.
Platts NEAT represents thermal coal cargoes with a calorific value of 5,750 kcal/kg NAR with 0.6% sulfur, 15% ash and 10% moisture, delivered 15-60 days forward to Northeast Asia ports on a CFR basis, with Kinnura in Japan as the basis port, and is calculated using the following inputs:
For instance, on November 1, the price of FOB Newcastle 5,500 kcal/kg NAR with ash content of 23% was assessed by Platts at $51.80/mt and the ash differential was assessed at 45 cents per 1% ash. Using these prices, the value of 5,750 kcal/kg NAR with typical 15% ash coal is calculated to be $57.75/mt. The Panamax dry bulk freight rate [CINAJ00] is assessed at $13.73/mt. This freight rate is then added to the calculated price of 5,750 kcal/kg NAR with typical 15% ash to arrive at the Platts NEAT, which is $71.48/mt.
Source: S&P Global Platts
Evolution of Platts NEAT – a brief history
We began assessing Platts NEAT on January 3, 2017, the first-ever price marker to reflect the delivered Northeast Asia price of coal, anticipating changes in supply and trade-flows.
The physical coal market in Asia has altered radically in the last few years. Japan has also surprised the market by moving away from one-price annually agreed contracts, showing flexibility in its traditionally staunch commitment to long-term agreements.
Demand for physical coal for the traditional 6,300 kcal/kg GAR calorific value has plummeted for every destination and Japan is also slowly expanding its supply origins from conventional suppliers like Australia and Indonesia. Russian, USA and Colombian thermal coals are making inroads into the Northeast Asia region.
Japan's woes with nuclear power has continued and coal has been one of the mainstream fuels for their power generation. This is not expected to change significantly in the coming years as nuclear power plants have been slow to restart after the Fukushima disaster. Japan has also been looking to decentralize its electricity sector, which might likely bring in more spot market activities in the coming years as end-users come under pressure to reduce costs.
How do we assess Platts NEAT?
Our team of experienced coal market reporters surveys a broad pool of active market participants including but not limited to producers, consumers, traders and brokers on a daily basis.
Platts places great value on its ability to discover settled physical tonnage deals, as well as bids and offers for spot cargoes, which constitute the best indication of the true market value for a given grade of coal. In the absence of confirmed trades, bids, or offers, assessments take into account buying, selling, tradable indications that meet Platts methodology guidelines. Bids and offers must increase or decrease in reasonable increments to ensure that every price level has been tested, and yield an assessment that reflects transactable value.
Our FOB Newcastle 5,500 kcal/kg NAR daily assessment reflects the tradable, repeatable spot market price of this increasingly important grade of coal at 1730 Singapore time precisely. We publish bids, offers, expressions of interest to trade, and confirmed trades during our Market on Close process every day. The information is summarized in our daily market commentary in Platts Coal Trader International.
Each day, in Platts Coal Trader International, the ash differential assessment is published directly beneath the FOB Newcastle 5,500 kcal/kg NAR assessment detailing the exact value of each 1% of ash content within the 17-23% band.
Once these numbers are published, Platts uses these numbers to calculate the value of coal with calorific value of 5,750 kcal/kg NAR and 15% ash on air dried basis. The Panamax dry bulk freight rate from Newcastle to Kinuura is then added to this number to arrive at the Platts NEAT.
SPECIFICATION: Platts NEAT reflects thermal coal cargoes with a calorific value of 5,750 kcal/kg NAR with 0.6% sulfur, 15% ash and 10% moisture.
LOCATION: Platts NEAT reflects deliveries to Northeast Asia ports on a CFR basis, with Kinnura in Japan as the basis port.
ASSESSMENT PERIOD: Platts NEAT reflects cargoes delivering 15-60 days forward from the date of publication. For example, on October 1st, the assessment would reflect cargoes delivered from October 16th to November 30th.
VOLUME: Platts NEAT reflects cargoes delivered on a standard Panamax vessel.
Discover more in the specifications guide
Why is Platts NEAT important?
Due to the changing electricity generation fuel types in the Northeast Asian market from coal to gas amid growing environmental concerns and tightening political influence, Platts NEAT is more than ever relevant for market participants to monitor the price movement of various generation fuel types on a delivered basis. Platts NEAT plays a crucial role as Northeast Asian electricity markets observe the JKM-NEAT spread for hedging and pricing fundamentals.
Platts NEAT on a delivered basis became more relevant to the Northeast Asian region as the market demands for greater transparency in the spot market as each country’s imports constitutes a share in the global coal environment.
In Japan, spot pricing becomes increasingly pertinent to the Japanese thermal coal market since the government opened its domestic electricity market to competition and market forces since April 2016. There has been a shift from mid to long-term contracts to spot contracts as cost competitions have been introduced between various neighboring regions and across various fuel types in Japan. In April 2020, the Japan government has introduced the unbundling of power transmission and distribution sector, with more liquidities for coal trading and a fair electricity price starting from the cost of fuel, including thermal coal.
Thermal coal continued to be an important base-load power supply because it involves the lowest geopolitical risk and has a competitive price per unit of heat energy among generating fuels. While the Japanese government acknowledges the problem with high emissions associated with thermal coal, the country still considers coal as an important fuel in its energy mix because of the low geopolitical risk and its competitive price among various fuel types. Platts Analytics expected power generation from coal to average 27.9 GW in Q2 2020, which is an increase of 0.8 GW year on year. With thermal demand supported by lower nuclear and increasing power demand, Japanese thermal coal import will likely to tick 2 million mt higher year on year in calendar year 2020.
In South Korea, the country is planning to shut down ten aged coal-fired power plants by the year 2022 and plans to transform another six coal-fired power plants, including Dangjin Eco Power, to LNG-fired ones. According to Platts Analytics, South Korean thermal coal import is expected to shrink 4.1% to 99 million mt in 2020.
Although the main reason for this was South Korea’s plan to replace part of coal-fired power generation with gas-fueled power generation, the overall weaker power demand may have contributed to the decline as well. As markets develop and we continue to track trade flows for South Korea, Platts Analytics import forecasts for 2020-2021 are subjected to changes.
South Korea thermal coal imports
In Taiwan, coal-fired power generation has been impacted by environmental restrictions as well as increased nuclear and gas generation. Taiwan thermal coal imports is likely to maintain relatively range bound at 48 million mt till 2021, according to Platts Analytics.
There is a shift in coal buying behavior into high-cv Australian coal and low-ash and low-sulfur mid-cv Indonesian coal due to environmental restrictions targeting the quantities of coal import. Gas and coal became compatible in Taiwan’s energy mix due to environmental restrictions, constrained by the capacity of existing gas terminals. Coal-to-gas switch is expected to be more prominent upon expansion of gas terminals, and hence the need for Platts NEAT has become more prominent as buyers need to consider the cost of electricity generation from different fuel types. As markets develop and we continue to track trade flows for Taiwan, Platts Analytics import forecasts for 2020-2021 are subjected to changes.
