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South Korean utility saves money on new Colombian coal purchasing strategy

SouthKorea's Korean East-West PowerCo., or EWP, acquired two Capesize cargoes of 130,000 tonnes eachof Colombian coal with a minimum calorific value of 5,700 kcal/kg at $41 pertonnes f.o.b. basis 6,080 kcal/kg, and 410,000 tonnes of the same on a CFRbasis at $52 per tonne, basis 6,080 kcal/kg.

Thecompany averaged the prices paid for the Colombian coal on a CFR and f.o.b.basis and thus was able to save approximately $3.50 per tonne on its purchase priceof six Capesize cargoes of Colombian thermal coal, or 670,000 tonnes, nettingthe company savings of around $2.34 million, Platts reported April 12, citing amarket source familiar with the company's strategy.

Thesource said he believes that the purchasing strategy EWP utilized for theacquisition of Colombian thermal coal, which takes advantage of the spreadbetween Colombian and Newcastle thermal coal f.o.b. prices in the Atlantic andAsia-Pacific markets, could be utilized for a long time if the spread betweenthe prices goes on and freight rates remain depressed, the report noted.

Centralto EWP strategy is having access to its own dedicated ships through itslong-term chartered vessel contracts, or CVC, Platts wrote, noting that theselong-term freight contracts allow EWP to allocate two CVC Capesize ships tocarry the thermal coal from Colombia.

Theships' journey takes three times as long as those from Newcastle.

Platts and S&P Global Market Intelligence areowned by McGraw Hill Financial Inc.