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---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 11/06/2000 
01:51 PM ---------------------------


Jez Peters
10/30/2000 07:49 AM
To: Stuart Staley/LON/ECT@ECT, George McClellan/HOU/ECT@ECT, Mike 
McConnell/HOU/ECT@ECT, Jeffrey A Shankman/HOU/ECT@ECT, Peter 
Bradley/LON/ECT@ECT, Samuel Grossman/LON/ECT@ECT, Pierre Aury/LON/ECT@ECT, 
Chris Connelly/LON/ECT@ECT, Riaz Rizvi/LON/ECT@ECT, Manfred 
Ungethum/LON/ECT@ECT, Sven Becker/FRA/ECT@ECT, John Moran/LON/ECT@ECT, 
Cornelia Luptowitsch/LON/ECT@ECT, Scott Longmore/LON/ECT@ECT, Tiffany 
Cochran/LON/ECT@ECT, Elizabeth McCarthy/LON/ECT@ECT, Tom Kearney/LON/ECT@ECT, 
Stephen Pirozzi/LON/ECT@ECT, Dimitri Taylor/LON/ECT@ECT, Kenny 
Nicoll/LON/ECT@ECT, Lisa Kent/LON/ECT@ECT, Candace Parker/LON/ECT@ECT, Harry 
Papadopoulos/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Katrina 
Bensadon/LON/ECT@ECT, Jez Peters/LON/ECT@ECT, Kevin McGowan/Corp/Enron@ENRON, 
Tom Mcquade/HOU/ECT@ECT, Scott Pack/NA/Enron@Enron, Dan Edwards/NA/Enron@ENRON
cc: Paul Mead/LON/ECT@ECT, Karolina Potter/LON/ECT@ECT, Meindert 
Witteveen/LON/ECT@ECT, Louis Redshaw/LON/ECT@ECT, Niamh Clarke/LON/ECT@ECT, 
Gregor Baumerich/LON/ECT@ECT, Florian Neubauer/LON/ECT@ECT 
Subject: ARA Coal Mkt Summary

MKT SUMMARY

The producers did not dissapoint at Coaltrans with evidence as early as 
Monday afternoon that they had managed to whip up
a bullish frenzy amongst most of the industry participants. However the fact 
remains that fundamentals have changed little 
in the past month with the same supply issues which served to tighten this 
mkt over the last eight weeks continuing to keep a 
firm hold on the market throughout Q4 and Q1 2001. Indeed with the ocean frt 
market still steeply inverted for the winter versus
the rest of the year ( $11 versus $9.50 RBCT/ARA) and with the U.S mkt 
experiencing a massive squeeze front end (east coast
trading $35 fob barge) there is little sign of relief in the short term - Q1 
2001 Fob ARA is now trading close to $44 with Jan/Dec
2001 around $43.25. Producers will of course lead us to believe that the 
origin markets are structured in a steep contango for
the remainder of the year, however leaving the issue of mkt consolidation 
aside there is little in the mkt to justify this - if anything
demand in the Far East looks a little shakier with steel orders slowing down 
and the financial markets under pressure and forecasts
for European demand estimate unchanged demand year on year. While a marked 
sell off for second half of the year is unlikely we
see the forward curve on the fob origin side flat going forward rather than 
contango. This said we cannot preclude a shift higher
of absolute prices for the whole curve from where we are today at around $33 
Fob South Africa equivalent to $35 - there is still
plenty of business to be done for 2001 and my feeling is that consumers will 
end up buying into it rather than risk the wait and
see game - we cannot underestimate the influence on international prices that 
the cartel hold and even if this is exaggerated
it's implication is enuff to create a bullish psychology.

SPOT TRADES 

150,000mt of Pinang quality from KPC for Dec shipment at $27.60 Fob Indo 
basis 6000 kcal/kg
160,000mt of Prima  quality from KPC for Nov shipment at $30.15 Fob Indo 
basis 6400 kcal/kg
150,000mt option of Prima quality from KPC - to be shipped latest end June at 
$30.65 Fob Indo basis 6400 kcal/kg.
2 x 150,000mt Put Options from TXU for April/Sep and Oct/Mar 02 respectively. 
Strike price  is $40.50 basis Amsterdam/
Rotterdam and expiry is Feb 15 and Aug 15. Premium - $0.50 cents.


SELLING SIDE

British Energy - pitching a 1,3 and 5 year deal to them as an extension to 
current contract we have with them which runs out
end March.
Scotts Power - looking to turn present Feb cape commitment from CIF to  FOR 
deal and sell incremental cape for March 
arrival.
H Del C - offering them a 9 year put option basis the SECA.
Endessa - we have offered them 4 plus 1 cape business  for 2001 based on $31 
Fob South Africa.
NCSC - looking at doing various geographical swaps and they will be utilising 
EOL in the next week to hedge some of their 
implied short position.
Heidelberger - offered them a hdymax of South African material CNF Turkey for 
November delivery at $47.50.
Bremen - shud sign within the month an eight year deal with Stadtwerke Bremen 
supplying them some 850,000mt of generic
quality coal on an annual basis.
Bewag - currently working an offer to supply 1 million mt for 2001 on 
delivered stockpile basis
ENBW/Neckarverke/Preag - offering Oz material for Nov/Dec just shy of $43 fob 
ARA.
Braunschweig - offered them 3 x 60,000mt for Mar/Jun/Jly delivery into 
Nordenham at $43.75 cif.
 Dyckerhoff - offered 4 x 15,000mt of generic South Africa material for 
April/November delivery at $43.50 fob barge.


BUYING SIDE

Duiker - Have put various structures in front of Duiker which involves us 
buying a cape a quarter for 2001 - they are due to get
back to us within the next few days.
Drummond - offered us a 5 year deal staring in 2002 at $35 Fob Colombia - 
thanks!!
Krutrade - working numbers to put an aggressive multi-year offer in front of 
Krutrade as they seem to be the movers in the Russian
mkt at present - we must establish a decent source of Russian coal within our 
portfolio to service our Bremen and Bewag business
going forward.
Anker - talking with them re securing south african stem out of Maputo for 
2001 - they are looking at somewhere around the $27 fob
Maputo level.
Masefield - currently in talks with them to secure some tonnage out of Santa 
Marta for 2001.
Coal Procurement - talking about securing a hdymax shipment per quarter out 
of Durban for 2001
Currently working with U.S. on finalising numbers for Synfuel supplies for 
2001 but currently remain $0.75 - $1.00 apart.


We currently have some 50mmt of Colombian coal sitting on the ground in 
Amsterdan/Rotterdam to sell as fillers into backend
of the year and we have the M.V. Cleopatra Dream arriving in Rotterdam on Nov 
26 with 143mmt of Australian coal to sell into
the mkt.

EOL

Much of the talk at Coaltrans centred around the press release from 
GlobalCoal of the intention of the Cartel plus Rio to launch 
an e-platform which will provide mkts against 3 Fob origin points and an ARA 
delivery point. Details of operational functionality
are scarce and increasingly it looks like this is explained by fact that they 
themselves do not know but general consensus reckons
it will be operational end of first quarter 01. Rather than see this as 
competition, if successful it could provide us with more access
to markets than we have previously had and there shud be some fun and games 
to be had with the various producers.  

Total volumes for EOL to date are at 1,700,000mt. We have seen a lot of 
interest in our options which in not surprising given current mkt 
conditions as consumers look to hedge themselves with cheap out of the money 
options. As volatility increases other non-traditional coal 
players are also entering the mkt to utilise the opportunities which 
increasingly volatility presents. Next project is to get quotes in Euros and
after that we will begin to look at spark spreads via EOL.

GAMEPLAN

We had a major cuppla weeks on the buying side prior to Coaltrans - 75% of 
which is owned through optionality out of RBCT at between
$30 and $31.50. Additional avenues into South Africa through Maputo and 
Durban now means that we have a decent portfolio of South
African material to add to our Colombian long. Overall our position is some 
2.5 million mt long including the latest Indonesian purchases -
our efforts now are focused on securing some of the term business which is 
out there at current numbers - it is difficult to call this mkt
in either direction with any certainty and hence we are busy covering any 
downside potential with a host of put options which the utilities
are keen to mkt in this bullish enviroment. After weeks of writing that we 
need to add other origins to our long portfolio we look in far better
shape today with good prospects to add further flexibility in terms of 
diversity of origins which ultimately reduces our reliance on Drummond.
While the mkt in general is still seemingly unable to grasp the true value of 
an option we will continue to exploit this chink by owning as
much flexibility as possible thru physical put and call options.

Best Regards
Jez