JFX to trade coal contracts next year

Zakki P. Hakim, Jakarta

The Jakarta Futures Exchange (JFX) plans to start trading coal contracts sometime in the first half of next year, according to a senior official of the exchange.

JFX director J.W. Sudomo told reporters on Monday that the exchange was still discussing the plan with the Indonesian Coal Mining Association (APBI), the Indonesian Cement Association (ASI), state power company PT PLN, and other key buyers.

He said that the realization of the plan required strong "commitment" from both producers and buyers.

Currently, players in the local coal market use coal prices announced by the New York Mercantile Exchange (NYMEX) as a reference in pricing the commodity.

But Sudomo said that coal contracts trade on NYMEX was not relatively liquid. He said that a liquid trade would be more beneficial for both producers and buyers of the commodity.

JFX opened its operation in 1999, trading contracts of olein, robusta coffee, crude palm oil and gold. However, currently, only olein and gold are traded, while the other two are temporarily suspended due to weak market response. The exchange is currently improving the contract specification for robusta coffee and crude palm oil to lure interest.

Presidential Decree No. 119/2001 stipulates that commodities designated as subjects of futures contracts are coffee, palm oil, rubber, cocoa, soybean, pepper, fish, shrimps, peanut, fuel, natural gas, sugar, clove, plywood, pulp and paper, yarn, tin, coal, gold, fertilizer, cement and electricity.

JFX division head of business development and promotion Andam Dewi said, however, it would be difficult for now to trade all of the commodities stipulated in the decree because of government intervention in the pricing of some of the commodities.

"How could people trade the contracts if the government has the final say in deciding commodity prices or if certain state companies monopolize some commodities," she said.

According to Business Monitor International, national coal production in 2004 is estimated at around 119.7 million tons, up from 109.3 tons in 2003 and 103 million tons in 2002.

Seventy percent of Indonesia's coal production goes to the export market.

Reports said domestic demand for coal has been increasing.