PREVIEW-Asia to start 1st deliverable coal futures July 7
* What: First Asia deliverable coal futures contract
* When: July 7
* Aims for physical coal prices and derivatives convergence
By Fayen Wong
SYDNEY, July 6 (Reuters) - Asia's first deliverable thermal coal futures contract will debut on Tuesday, aiming to converge physical coal prices and derivatives.
But the launch of the contract, which will compete against ICE Futures in a region where coal trading has been slow to take off, prompted some market players to question if the platform can gather sufficient liquidity.
The thermal coal futures and options contract <0#YCX:>, launched by Australia's ASX Ltd (ASX.AX), Asia-Pacific's second-largest listed stock exchange, will allow end-users to lock in prices that have plummeted 64 percent from a July record high of $200 a tonne.
It will also enable producers to hedge against further price falls.
"Over time, it will help to improve the general liquidity in the coal market since it provides more hedging products for our clientele," Geoff Clear, ANZ's global co-head of commodities told Reuters in a recent interview. [ID:nSYD234702]
The deliverable feature on ASX's futures contract is the key point separating it from the rival Newcastle coal futures contract <0#NCF:> -- launched in December by electronic trading platform globalCOAL and the Intercontinental Exchange (ICE) and is a financial product. [ID:nSP406938]
"The fact that it's a deliverable futures contract could make it popular among some Asian buyers. But it also means that it will need to gain a level of support from producers for it to gather momentum and liquidity," said a coal trader in Japan.
ASX said its contract could help bring a convergence between derivatives and physical coal prices, which will be independent of bids, offers and trades in the over-the-counter (OTC) market.
The contract will be based on Japanese-quality thermal coal exported from Australia's Newcastle port, the world's biggest export harbour for the fuel.
The exchange will act as the clearing house for the futures, allowing participants to avoid any risk of counterparties defaulting on trades.
