Noble Group explores coal deals with fixed prices or terms to reduce risk

NOBLE Group is looking at conducting coal transactions on fixed prices or fixed terms as it grapples with the decoupling of a key coal price index from market fundamentals.

The group last week announced a first-quarter loss of US$129.3 million despite a rise in revenue, blaming it on a dislocation in coal markets.

It said in response to a query from the Singapore Exchange on Thursday evening that it uses the Newcastle Energy Coal (NEWC) price reference for pricing trades, as a pricing mechanism itself in index-linked trades, as a hedging tool for managing price risk and as a trading tool for proprietary trading.

With NEWC no longer reflecting market fundamentals, the group is reviewing its ability to rely on the benchmark as a relevant reference point for commercial discussions.

This includes "looking at more fixed price or fixed term transactions, as well as any other index pricing mechanisms", it said. "We continue to study options to reduce the risk of unpredictable events."

Noble, which recorded a net profit of US$40.5 million in the first quarter of FY2016, also said that Noble America Energy Solution - which it has since sold off - contributed US$52 million in operating income in that period.