The four companies that control around 40% of world production of sea-borne thermal coal have announced plans to establish an internet-based global trading environment. Coal producers Anglo American, Billiton, Glencore International and Rio Tinto, together with online provider Accel-KKR, hope to begin operations within four months.
The parties will fund Global Coal, which will initially serve global producers and consumers of thermal coal as an over-the-counter market. The Global Coal e-marketplace hopes to benefit industry participants by reducing transaction costs, increasing price transparency and enabling a forward price curve. The e-marketplace will be neutral and open to all industry participants, and will rigorously protect commercially sensitive information.
Sean Gilbertson, acting chief executive of Global Coal, said: "We believe that the coal industry will benefit enormously from the creation of a neutral and open marketplace. Because of the market liquidity that will be provided by strong industry participation, Global Coal will be able to deliver on the promise of such a marketplace, delivering value for consumers and producers as well as to our shareholders. We invite all consumers and producers to participate, whether as founding shareholders or as users, and look forward to their involvement."
Global Coal says it will support three different types of transactions. First, it will provide a real-time trading environment for current and future standardised coal contracts. Second, it will provide an internet-based trading environment for custom transactions where the coal specification or delivery terms fall outside of the standard contract parameters. Third, it will facilitate a tender/request-for-proposal process for buyers.
The venture to make more transparent the trading of one of the world's major commodities is not without precedent since the way thermal coal was traded began to shift towards the spot market in around 1996. Various organisations, including Barlow Jonker, have tried to launch similar projects over the last five years with little success. Most recently launched in June was oz-coal.com by Brisbane-based Transcoal for business-to-business buying and selling of coal.
The sale of coking coal continues to be dominated by long-term contracts and relationships, which is why predominantly coking coal producer BHP is not included in the Global Coal group.
