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Coal Futures Contract Provide Guarantee

Jakarta, Kompas – Futures contracts in coal trading transactions provides a price guarantee for industry players amid fluctuating commodity prices. Although quite profitable for sellers and buyers, futures contracts can make coal prices less competitive.

It was surfaced in Argus Coalindo Indonesia Coal Forum 2018, in Jakarta, Thursday (8/2). This gathering of coal industry players become a socialization event for futures contract concept in Indonesian Coal Index (ICI) for coal trading.

This was conveyed by PT Coalindo Energy CEO Maydin Sipayung. Coalindo Energy is the Indonesian Coal Index provider.

Maydin said, futures contracts become the agreed price of buyers and sellers of coal for a certain period. This changes the pricing system that has been set for a period of one year.

“The concept of futures contracts is applied because the selling and buying of coal is done in a long period of time. Because, the delivery time takes months. On the other hand the coal prices are very volatile, “he said.

Futures contract, Maydin continued, is a tools to determine the coal price for a certain period. Buyers and sellers get guaranteed prices.

Executive Director of the Indonesian Coal Mining Association (APBI) Hendra Sinadia assess, the implementation of futures contracts have a positive and negative impact. In general, the positive impact that buyers and sellers will experience is the guaranteed price.

“But, on the other hand, futures contracts make the selling price of coal has no competitiveness. When the coal prices are high, the producers cannot experience the benefit, “he said.

Head of Sub Directorate of Production and Marketing Operations Supervision, Directorate General of Mineral and Coal Ministry of Energy and Mineral Resources Hersonyo Wibowo said the coal production target this year is 485 million tons.