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---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 11/13/2000 10:06 AM --------------------------- Jez Peters 11/13/2000 05:03 AM To: Stuart Staley/LON/ECT@ECT, George McClellan/HOU/ECT@ECT, Mike McConnell/HOU/ECT@ECT, Jeffrey A Shankman/HOU/ECT@ECT, Peter Bradley/LON/ECT@ECT, Samuel Grossman/LON/ECT@ECT, Pierre Aury/LON/ECT@ECT, Chris Connelly/LON/ECT@ECT, Riaz Rizvi/LON/ECT@ECT, Manfred Ungethum/LON/ECT@ECT, Sven Becker/FRA/ECT@ECT, John Moran/LON/ECT@ECT, Cornelia Luptowitsch/LON/ECT@ECT, Scott Longmore/LON/ECT@ECT, Tiffany Cochran/LON/ECT@ECT, Elizabeth McCarthy/LON/ECT@ECT, Tom Kearney/LON/ECT@ECT, Stephen Pirozzi/LON/ECT@ECT, Dimitri Taylor/LON/ECT@ECT, Kenny Nicoll/LON/ECT@ECT, Lisa Kent/LON/ECT@ECT, Candace Parker/LON/ECT@ECT, Shamim Ali/LON/ECT@ECT, Katrina Bensadon/LON/ECT@ECT, Jez Peters/LON/ECT@ECT, Kevin McGowan/Corp/Enron@ENRON, Tom Mcquade/HOU/ECT@ECT, Scott Pack/NA/Enron@Enron, Dan Edwards/NA/Enron@ENRON, Paul Mead/LON/ECT@ECT, Karolina Potter/LON/ECT@ECT, Meindert Witteveen/LON/ECT@ECT, Louis Redshaw/LON/ECT@ECT, Niamh Clarke/LON/ECT@ECT, Gregor Baumerich/LON/ECT@ECT, Florian Neubauer/LON/ECT@ECT cc: Subject: ARA Coal Mkt Summary SUMMARY The market has definitely come under pressure since the dizzy heights of of a fortnight ago where producers were still standing firmly behind $33 per metric on a FOB Richards Bay equivalent and claiming it was heading swiftly to $35. While there had been some nervous short covering by utilities in the month prior to coaltrans which had fuelled the mkt somewhat the buyers have remained disciplined and in general have refused to commit to these numbers. The lack of business at these numbers has definitely moved the mkt south and of course mkt psychology with it. While producers are still playing lip service to abve numbers they are actively putting up offers which reflect levels of $31 FOB Richards Bay and wud trade down to $30.50. Several sources have confirmed in the last cuppla days that negotiations between Kepco and South African producers for price fixing 2001 tonnage fell apart which ultimately means there will be an additional 3 million mt which the South Africans have to find a home for - destination Europe most likely. On the flip side Kepco will be looking towards Indonesia and China to substitute this tonnage and this combined with rumours that Formosa Plastic will be looking for some 3 million tonnes of additional material from China cud serve to tighten the Pacific mkt over the next months for first half 2001. There is definitely an intent within the consuming community to make a stand against the cartel and there has been a lot of activity over last three weeks with business being booked out of the U.S, Indonesia and Australia at numbers close to what was achievable from S.A. into Europe. This can only serve to strengthen our opportunities in this mktplace and indeed German utilities who have been held to ransom by similar minded producers in Poland are now exploring every end to do business with other suppliers - namely ourselves in order to avoid being captive to one supplier. Weglekoks incidentally are currently in the mkt buying Russian material to cover sales made against Polish to Bewag - we don't want to be short Polish in the near term! Mkt now trading at $41.25 Fob barge ARA for Jan/Dec 2001and $42.15 level for the Jan/Mar 2001. We still see couple dollars on the downside although the latest incident (guerrilla attack on rail line last week) has Gary Drummond threatening to cut production down in Colombia by half for first few months of 2001 to make a point to the unions. We are still trying to ascertain how much this wud bull the mkt short-term but we wud certainly take the opportunity to sell any spike. SPOT TRADES January pnmx FOB Santa Marta from Masefield at $33pmt basis 11800btu One Cape of Colombian to Scotts Power for March delivery to Hunterston at $41 basis 6000kcal/kg Sld the Prima Cape Option which was bot a fortnight ago at $30.65 to NCSC for $33.25 FOB Tanjang Bara both basis 6400 kcal/kg. Bot 25mmt Russian material CIF Stettin at $39.75 to put against our Bewag commitments Sld 5mmt Colombian to BEC (Duisbourg) basis $42.5 FOB ARA Sld API 2 Index for 2001 for 15mmt a month to Innogy Sld API 2 Index for 2002 for 15mmt a month to Innogy SELLING SIDE One Cape Q1 of Generic South African to Anglo at $32.5 FOB RBCT basis 6000kcal/kg 500mmt delivered Berlin for Bewag for 2001. Struggling to compete with Weglekoks offer out of Poland. 2 pnmx of South African CIF Brunsbuettel for Jan and April shipment at $41 to UMAR (trader) who took the direct biz. 7mmt each month Feb/Dec 2001 to Anneliese at $41.75 basis generic South African specs 40mmt FOB Barge of generic South African to Dusseldorf for Q2 at $42.50 One pnmx to AMCI of Colombian material taking back either South African/Australian/U.S coal next year at agreed frt spreads. One pnmx of 1.4 Sulphur "U.S coal" $40 CIF Gijon to H Del C - deal done subject to quality. One pnmx of 1% Sulphur "US coal" $40 CIF Rotterdam to GKE. BUYING SIDE Continue discussions with Masefield regarding supplies from Santa Marta for 2001 Working a proposal with Krutrade which will give us access to some significant tonnage of Russian coal for 2001 forward. Various projects within South Africa all of which emanate from the development and success of "Operation Springbok". EOL Update Total EOL trades for November stand at 1.95 million mt out of a running total of 3.67 million from it's inception. As the figures suggest there is increasing activity/liquidity in the market with the arrival of several new players in recent weeks - most notably AEP. Increased volume in EOL has also been mirrored by an increase in the volume of SECA's traded in the OTC market with more and more utilities who have upto now remained on the fringes deciding to join the party - RWE has been the latest SECA virgin to lose it's cherry closing a deal with ourselves early last week on Q1 through TFS. We are now offering our products in Euros aswell the good old green back much to the confusion of one or two of our clients! At current pace we shud have surpassed all our expectations by passing the 5 mill mark by the end of the year. GAMEPLAN We are currently long to the tune of 1.5 mil mt but this is essentially all through optionality at origin which runs through to 2004. Strip these out and effectively we are running a short ARA position of some 1.5 mill mt weighted pretty evenly across Q2, Q3 and Q4 2001 backed by some implied longs at origin through options and firm tonnage out of both Richards Bay and Drummond. We are very comfortable with this as we hold enuff bullets at reasonable numbers to go after the term Cal 01 business while running a European short pos'n which shud capture the weakness which we are anticipating in both the frt mkts and in the Atlantic coal mkt. Shud the the European mkt gain some momentum then we have own some slightly out of the money options which we wud utilise to execute any physical shorts in ARA and to keep mkt capped. Best Regards Jez
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