Indonesia’s JFX Plans to Start Physical Coal Contract in 2014

The Jakarta Futures Exchange plans to start a physical thermal coal contract next year to create an alternative benchmark price in Indonesia, the world’s largest exporter of the fuel for power-stations.

JFX has commitments from as many as five producers to sell coal through its daily electronic spot trading system, Bihar Sakti Wibowo, a director at the exchange, said in an interview yesterday in Jakarta. Buyers will be a mix of traders and end-users and cargoes will be shipped for both domestic and export markets, he said.

The Energy and Mineral Resources Ministry sets monthly benchmark prices for miners to calculate selling prices and royalties. The current marker is based on coal with a gross heating value of 6,322 kilocalories a kilogram.

“The current benchmark’s price is often problematic, for example when the price is set higher or lower than the market,” Wibowo said. “This will make pricing in the exchange important.”

The JFX is finalizing trading rules and deciding which coal grades to use, Wibowo said. The exchange will submit the plan for approval to Indonesia’s Commodity Futures Trading Regulatory Agency next week, he said. The bourse, established in 1999, also trades cocoa, palm olein and gold futures.

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