According to CTA President Sean Murphy, “The quality of coal being mined in Central Appalachia is changing and our membership indicated that a new specification was in order to reflect this reality. After discussions with coal buyers, sellers, and traders, we jointly developed a new spec, which will be added to the standard products for the traded coal market to consider.”

This proposal will not affect currently cleared coal products (commonly known as NYMEX/QL, CSX/QX, and PRB/QP). The CTA will work with its members, CME, and others to determine whether a new cleared product based on the new spec is warranted and if so how it would be implemented.

The specs are exactly the same as the existing CSX product, but the typical and reject BTU parameters have been reduced by 200 BTU/lb (from 12,500/12,200 to 12,300/12,000):

• Origin: CSX Kanawha and/or Big Sandy Freight District
• Contract Size: Unit Trains of approximately 11,000 tons
• QVA: QVA Applies
• Delivery Point: FOB Railcar at the mine, capable of loading 11,000 ton trains in 4 hours or less
• BTU: 12,300 Btu/lb typical with rejection below 12,000 Btu/lb
• Moisture: 7 % typical
• Ash: 12% with rejection above 13.5%
• SO2: Reject >1% sulfur
• HGI: 42-45 typical, reject below 40
• Volatile Matter: Minimum 30%
• Sizing: 2″ x 0″ with maximum 55% below ¼”
• Initial Fusion Temp: 2,600 AFT typical
• Delivery Point: FOB Railcar at the mine, capable of loading 11,000 ton trains in 4 hours or less

This spec and other current issues will be discussed at the CTA’s Midyear Meeting, which will be held July 27-28 in New Orleans, LA. Details are on the CTA’s website (http://www.coaltrade.org).

The CTA exists to promote coal trading. CTA develops and maintains industry standards for coal trading activities with the goal of achieving a disciplined, liquid, and efficient coal trading industry. To achieve this goal, CTA develops consensus-based policies, exchanges information among members and other interested professional and technical groups, and offers training programs to improve the knowledge, skills, and practice tools of its members.

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Following are the new officers:

• President Sean Murphy is Director of Fuels for Mirant Energy Trading, where he oversees procurement of fuel for more than 10,000 MWs of electric generation. In addition to procurement activities, his oversight includes proprietary trading activities in coal and oil.
• Vice President Jennifer Johnson is SVP of Sales and Trading for Arch Coal Sales, LLC, a wholly owned subsidiary of Arch Coal, Inc. She is responsible for the marketing and optimization of 140mm tons of PRB coal annually, as well as Arch’s coal trading activities.
• Treasurer Ryan Gentil is the Portfolio Risk Manager for Duke Energy. He manages the fuel risk associated with the coal assets for Duke Energy’s 3,000 MWs of unregulated coal-fired generation.
• Secretary David James is a Director, Sales and Marketing with Peabody COALSALES, LLC. He manages sales and marketing of Peabody Energy coal products in the Powder River Basin.

The membership also elected these new directors:

• Tom Holleran is Director, Energy Products & Services, with NYMEX, a part of the CME Group. He executes the firm’s energy product growth strategy, including increasing trading volume and distribution of petroleum products futures and options and assisting in the development and launch of new products and services.
• Matt Reed is the Vice President – Carbon Division of Traxys North America. He manages the US coal trading and marketing activities for the firm, which focuses on the trading and marketing of metals and carbon products worldwide.

The CTA exists to promote efficient and effective coal trading and risk management practices and procedures. CTA develops and maintains industry standards for coal trading activities with the goal of achieving a disciplined, liquid, and efficient coal trading industry. To achieve this goal, CTA develops consensus-based policies, exchanges information among members and other interested professional and technical groups, and offers training programs to improve the knowledge, skills, and practice tools of its members.

The lead class instructor will be Rick Thomas, a 30-year coal industry veteran who now serves as a consultant to producers and traders. He has been a buyer, purchaser, and trader of coal. He helped pioneer the OTC coal market in the United States. Several CTA board members will also participate as presenters.

Course participants will learn the basics of coal trading: the traded coal products; the types of trading instruments (forward contracts, swaps, options, basis trades), identifying and managing risk; understanding forward curves, and establishing a trading function in your organization.

The course includes discussions on the following topics:

• coal commodities and trading platforms,
• hedging strategies for producers and generators,
• swaps and indexed physical transactions,
• futures and options,
• time, quality, and location spreads,
• settlements process,
• risk management,
• credit and contract language.

The registration fee for CTA members will be $250, and for nonmembers $450. Class size is limited. The deadline for hotel room reservations at a discounted rate, $169 a night, is August 9. To reserve a room use the link on the CTA’s website under the Events tab.

The CTA exists to promote efficient and effective coal trading and risk management practices and procedures. In support of this effort, the CTA develops and maintains industry standards for coal trading activity with the goal of achieving a disciplined, liquid, and efficient coal trading industry. To achieve this goal, CTA develops policies, exchanges information among members and other interested professional and technical groups, and offers training programs to improve the knowledge, skills, and practice tools of its members.

• CTA Reception at the Eastern Fuel Buyers Conference, May 4, Disney’s Yacht and Beach Club Resort, Orlando, FL
  This reception precedes the 2010 Eastern Fuel Buyers Conference. It will include a wine tasting and the opportunity to win $500 in Disney dollars while enjoying the company of colleagues from utilities, producers, trading companies, and brokerages. Registration is requested.
• 2010 Midyear Meeting and Coal Mine Tour, June 16-17, Embassy Suites Hotel and the Mountain Laurel Mine, Charleston, WV
  The 2010 Midyear Meeting is the business meeting where we elect officers and discuss changes to the CTA’s Master Coal Purchase and Sale Agreement. This year we also will tour the Mountain Laurel Complex, a large underground longwall and continuous miner section mine. Registration is free, but required. See the CTA website for other requirements.
• Fundamentals of Coal Trading Class, September 1-2, Intercontinental Buckhead Hotel, Atlanta, GA
  Sold out in 2007, 2008, and 2009, this class has been expanded to a day-and-a-half class. The instructor, along with a panel of industry participants, will teach how coal trading is conducted, build awareness of available risk management tools, and familiarize future coal traders, utilities, coal producers and support personnel with over-the-counter coal markets. The registration fee for CTA member company participants is $250, and for nonmembers $450.
• Coming Later This Year: A New, Online Coal Trading Introductory Course
  Look for details later this year on our new, online beginner course, Coal Trading 101: Introduction to Coal Trading. This learning option is perfect for support and back office staff who may not need the in-depth instruction of our in-person class, but need to understand the fundamentals of coal trading.
• 2010 Coal Trading Conference, December 6-7, Millennium Broadway Hotel, New York
  This year we return to the Millennium Broadway Hotel located in Times Square. This event includes a business meeting the afternoon of Monday, December 6, followed by a welcome reception, with the conference on December 7. Program details and an online registration form will be available in October.

Several CTA member firms and industry leaders have already agreed to support the QVA provision. They include Arch, DTE Energy, Duke, Koch, Mirant, Peabody, Rhino, United, and White Energy. Several other key participants have also expressed support for the move. Additional participants are expected to announce their official support for the provision following the December 7 business meeting.

The QVA provision was developed by the CTA’s New Products Committee and then approved by the Board of Directors. According to CTA President Raphael Pierce, “Counterparties adopting QVA would use prompt market index pricing to systematically settle monthly volumetric discrepancies. The standard represents a critical step toward stabilizing liquidity and building the necessary confidence to attract a broad base of future participants going forward.”

According to QVA Subcommittee Chairwoman Jennifer Johnson, “As companies eliminate exposure from positions that do not have QVA, we should see an increase in OTC CApp Rail activity markets that includes monthly QVA as standard. This provision, when established as a standard, will better position participants to manage traditional, mostly annual, tonnage-based exposure with OTC physical and financial products.” Earlier this year, the CTA’s members approved a proposal to include QVA as a standard specification of the Power River Basin products beginning in 2011.

The CTA has posted background information on the QVA issue and an FAQ document on the CTA website for Industry Standards (http://www.coaltrade.org/industrystan.html). Comments on the QVA provision may be sent to the CTA Executive Director Bob McLean, CAE.

The CTA business meeting on Monday December 7 is open to all CTA members. The meeting is held in conjunction with the Coal Trading Conference, which begins with a welcome reception on December 7 and continues with a day-long series of speakers and panelists on December 8. Pre-registration is required for the conference only.

The CTA exists to promote efficient and effective coal trading and risk management practices and procedures. CTA develops and maintains industry standards for coal trading activities with the goal of achieving a disciplined, liquid, and efficient coal trading industry. To achieve this goal, CTA develops consensus-based policies, exchanges information among members and other interested professional and technical groups, and offers training programs to improve the knowledge, skills, and practice tools of its members.

Paul T. Demzik, president of Peabody COALTRADE International and Peabody Energy, will be the keynote speaker. Demzik will offer a coal supplier’s perspective on the industry, including an update on international markets. Returning as luncheon speaker will be Dennis Gartman, editor of The Gartman Letter. Consistently rated the conference’s top speaker at previous events, Gartman will offer a global financial market outlook. Other sessions will offer a US coal industry outlook and an update on carbon and SO2 legislation. Also on the agenda will be the popular Bull and Bear Debate and the Trading Trends panel.

The two-day event will begin at 1:00 p.m. on Monday, December 7, with the Coal Trading Association annual business meeting. That evening the conference begins with a welcoming reception. The full-day conference program will be held on Tuesday, December 8.

The early bird registration fee is $695 for Coal Trading Association and American Coal Council members, $825 for nonmembers. After November 7 the registration fee will be $840 for members, $970 for nonmembers.

The Millennium Broadway Hotel is conveniently located in the heart of Times Square. The room rate is $399 a night. The hotel is offering a limited number of hotel rooms the weekend before the conference at the same rate.

The lead class instructor will be Rick Thomas, a 30-year coal industry veteran who now serves as a consultant to producers and traders. He has been a buyer, purchaser, and trader of coal. He helped pioneer the OTC coal market in the United States. Several CTA board members will also participate as presenters.

Course participants will learn the basics of coal trading: the traded coal products; the types of trading instruments (forward contracts, swaps, options, basis trades), identifying and managing risk; understanding forward curves, and establishing a trading function in your organization.

The course includes discussions on the following topics:

• coal commodities and trading platforms,
• hedging strategies for producers and generators,
• swaps and physical indexation,
• futures and options,
• time, quality, and location spreads,
• settlements process, and
• credit and contract language.

The registration fee for CTA members will be $250, and for nonmembers $450. Class size is limited. The deadline for hotel room reservations at a discounted rate, $169 a night, is August 10. To reserve a room, call the West St. Louis at 800-937-8461.

The lead class instructor will be Rick Thomas, a 30-year coal industry veteran who now serves as a consultant to producers and traders. He has been a buyer, purchaser, and trader of coal. He helped pioneer the OTC coal market in the United States. Several CTA board members will also participate as presenters.

Course participants will learn the basics of coal trading: the traded coal products; the types of trading instruments (forward contracts, swaps, options, basis trades), identifying and managing risk; understanding forward curves, and establishing a trading function in your organization.

The course includes discussions on the following topics:

• coal commodities and trading platforms,
• hedging strategies for producers and generators,
• swaps and physical indexation,
• futures and options,
• time, quality, and location spreads,
• settlements process, and
• credit and contract language.

The registration fee for CTA members will be $250, and for nonmembers $450. Class size is limited. The deadline for hotel room reservations at a discounted rate, $169 a night, is August 10. To reserve a room, call the West St. Louis at 800-937-8461.

Following are the new officers:

• President Raphael Pierce is senior vice president for Urban Energy Enterprises, LLCma privately held energy marketing and consulting company where he is responsible for the oversight and development of UEE’s commercial energy products, services, and infrastructure.
• Vice President Sean Murphy is the director of Fuels for Mirant Energy Trading where he oversees procurement of fuel for more than 10,000 MWs of electric generation. In addition to procurement activities, his oversight includes trading activities in coal, oil, and natural gas.
• Treasurer Ryan Gentil is the Portfolio Risk manager for Duke Energy. He manages the fuel risk associated with the coal assets for Duke Energy’s 3,000 MWs of unregulated coal-fired generation.
• Secretary Jennifer Johnson is president of Arch Energy Resources, LLC, a wholly owned subsidiary of Arch Coal. She is responsible for risk management, asset optimization, and trading activity. She was also one of three new directors elected to the board.

The membership also elected these new directors:

• Dan Vaughn is the Director of Coal Services for ICAP United’s coal brokerage desk. ICAP United is affiliated with ICAP Energy LLC, a subsidiary of ICAP plc, the world’s largest inter-dealer broker. The Group is active in the wholesale market for OTC derivatives, fixed income securities, money market products, foreign exchange, energy, credit and equities derivatives.
• John Wagner is supervisor of Coal Procurement and Logistics for the Detroit Edison Company and Manager of Coal Procurement for DTE Coal Services. He manages the coal supply process for Detroit Edison’s generating assets, as well as supporting supply requirements for DTE Coal Services.

The project responded to members’ requests to address future environmental legislative concerns. According to CTA Vice President and New Products Chairman Raphael Pierce, “This project will provide greater clarity and uniformity to the existing OTC market and establish new hedging tools for counterparties interested in overall portfolio management.”

A diverse group of market participants, which included producers, traders, and utilities, were heavily involved to ensure the project’s long-term success. “The vetting process was extremely detailed, but we are all very pleased and excited with the final results,” according to Aaron Martinsen, who was the co-chair of the Illinois Basin Subcommittee. Although it is difficult to guarantee product liquidity, the vast proven reserves in both basins as well as future domestic end-user demand projections, should assist to provide underpinning support for the two products.

The Illinois Basin Contract spec will be quoted as 11,300 Btu, 6.0 lbs SO2, delivered on either side of the John T. Myers lock (MP 846) between MP896 and MP784 on the Lower Ohio River. The subcommittee recommended modifying the existing OTC PRB contracts to increase unit train size to 15,000 tons. with a tonnage variance of +/- 2%. In addition, the subcommittee recommends including Jacobs Ranch as an 8800 PRB source point for CY 2010 and beyond trades.

CTA President Tom Hiemstra anticipates a relatively seamless transition for the new products, but notes market participants must be committed to implementing new standards for the process to work effectively. “The primary role of the CTA is to provide recommendations, not mandates, to the general coal community that enhances overall liquidity and market viability,” Hiemstra says. “We are most hopeful the recent recommendations will prove beneficial as the coal markets continue to evolve and transition to different production regions.”

The CTA will announce a second slate of products for comment sometime during the third quarter of 2009. The products will include Northern Appalachia and Eastern Rail contracts. Full contract specifications for all products recently completed and those currently in development are on the CTA’s website.

The New Products Committee will discuss their work at the CTA’s 2009 Midyear Meeting, June 10-11 in Charlotte. For more information on the committee, contact Raphael Pierce. For CTA membership information or details about the Charlotte meeting, contact CTA Executive Director Bob McLean or visit the CTA website.