Coal Market – Activity in Volatile Markets
The coal and shipping markets, in which the Israeli National Coal Company is active, are unique global markets. Over the past few years, these markets have experienced sharp price fluctuations which have caused the market to restructure, and new contracts have been formed, which are suitable for volatile markets.
The company verifies the credibility of coal suppliers to ensure its cooperation with renowned suppliers, and continually searches for new sources of coal.
In accordance with needs, market status and in light of its obligation for continuous coal supply, the company forms purchase contracts in the global coal market. The agreements with coal suppliers are made by standard contracts (usually linked to international coal rate indexes), with restrictions relating to the quality and quantity of the freights. There are several types of contracts with coal suppliers:
Long Term Contract A contract valid for at least two years, under which the company agrees to either receive a certain number of freights or a certain quantity of coal in tons per year from a single supplier.
Annual Contract A contract valid for one year, under which the company agrees to receive one freight or more throughout the year.
Spot Contract A single transaction for purchasing one freight from a coal supplier.
Framework Contract A contract setting the framework for the transaction terms, so that at any given moment, a transaction of any kind can be implemented under the conditions set in the framework contract.
Shipping terms are set in accordance with Incoterms, including:
CIF (Cost, Insurance and Freight) – A contract under which the coal supplier is responsible for loading coal onto the ship, and shipping the coal to Israel.
FOB (Free on Board) – A contract under which the Israeli National Coal Company is responsible for shipping the coal to the power stations in Israel.
Price contracts in the coal market are generally formed for very short periods. The company regulates its mix of contracts in accordance with this policy, as well as with market forecasts and trends