A future in coal: viable or not?

Although other energy commodities have developed successful futures contracts, long-term contracts still dominate the coal market. To establish whether coal markets will develop in the same way, coal price and volume data are tested against a set of criteria considered to represent some of the factors contributing to the development of a successful futures contract. Coal meets only some of the criteria: market players are subject to little risk in quite a stable market, have strong preferences for the specific nature of long-term contracts and profit from product uniqueness, each trade being individually negotiated. Potential structural changes in the western European market are not felt to be sufficient to create demand for a coal futures contract, but an empirical model has been developed that could form the basis of a further study to predict the potential for success