While the coal industry has recently found a new champion in the form of US President Donald Trump, up until 2016 it was experiencing an ongoing transition as cleaner fuel sources in the US and other countries gained traction. Following its June 2015 launch, Javelin Global Commodities positioned itself as a ‘change agent’ for the coal markets to address this very issue. Since then, it has worked with producers, particularly in the US, to find new markets and restructure contracts to save money and increase operational efficiencies. “We go to our clients and ask how we can help them run their businesses better,” says Javelin’s London-based chief executive officer, Peter Bradley, a former head of bulk commodity trading at Goldman Sachs.
As a result of this approach, Javelin has grown its presence in the coal markets through deals in both the physical and financial markets. Working with a private equity-backed US power plant in Baltimore, Javelin materially reduced the plant’s costs by introducing new, cheaper types of coal, renegotiating its delivery contracts and entering into a long-term deal with the utility which allowed it to hedge the resulting power. “We essentially helped a power station refuel itself to operate in a lower power priced world,” Bradley says. “This is a great example of how to make a profit and lock in long-term stability for the plant.”
Javelin’s clients, when interviewed by Energy Risk, agreed that its knowledge of global coal markets, its flexibility and pricing, and the creativity of its solutions put the trading house head and shoulders above the competition. And in its first full year of operations, Javelin’s clients certainly seemed to appreciate its attempts to bring about change. The trading house shipped 14.5 million tonnes of coal – more than quadrupling the three million tonnes shipped during its six months of operations in 2015. The company now has more than 70 trading partners, up from 40 in 2015, and it expanded into new markets last year via a long-term marketing agreement to export one million to two million tonnes of metallurgical coal. Javelin’s risk management activities also continued to grow throughout 2016 as it increased its pool of counterparties from four to 12 year-on-year, trading more than 25 million tonnes of coal derivatives (up from three million tonnes in 2015) and 55 million tonnes of iron ore derivatives (up from 14 million tonnes the previous year).
The week on Risk.net, July 14–20, 2017Receive this by email