FAILED COAL TRADING DEALS IN INDONESIA
Recently we have seen many coal deals that have failed, below i will list the most common reasons why and what should happen in brackets to try and get the coal actually shipped out, i will list them in the order that they fail by, no 1 being the most common.
1. Contract was signed before the funding was sorted out and the outcome was the deal never happened because the seller could not find a funder, a seller should NEVER sign a contract unless they already have a funder on board, a contract is a binding agreement and should never be signed unless both sides can perform as per the terms of the contract. ( get a funder on board at start of contract negotiations with buyer, then ALL can mutaully agree BEFORE signing the contract)
2. L/C is issued by buyer to the seller but the buyer NEVER gets the BPG from the seller ( make the L/C non-operational and conditional to a BPG from a seller within a time frame, let us say max 7 days, then if no BPG then L/C is dead, but proof of funds from seller is the easiest way before sending and L/C)
3. Seller is not real, has no coal and punts it around to everyone to try and find the coal (a buyer should NEVER sign a contract unless they are certain the seller is real and genuine)
4. inspection and testing of coal does not meet the contract specification. (past performance documentation is best way to avoid this, but sometimes the past performance given is not genuine and you find out after testing, a risk that a buyer has to take)
5. MV is sent by buyer but no coal ready, most times this relates to no funder or funder fails to do what he agreed with the seller, not always the seller at fault, but it is the buyer that loses the most. (buyer must ensure the mine has a funder in place and they have the funds or that the mine has their own funds, in either case the buyer should ask for proof of funds via the bank to bank system)
6. Buyer issues an L/C without a BPG clause, then once seller gets the L/C they then turn around to a buyer and say they can only do deal on a cash basis and basically try and blackmail the buyer into paying cash or the L/C is stuck until it runs out. (again we go to proof of funds via bank to bank to ensure they have the money to complete the contract)
The above are the main reasons for failed deals, of course there are others, it is also not always one sided,both buyers and sellers cause failed deals, but if most stick to the basic common sense way of doing coal trading then the failed deals will be very few rather than many as there are now.
Please contact me [email protected] if you should have any questions relating to the above.
Marketing Executive & Business Development, Oil & Gas & Freelancer of Bank Instruments at PT.Karya Daya Mandiri
7 年Hello Sir, I will show that our Coal Trading is very reliable and easy to trade. I will make a first successable Coal Trade.
Marketing Consultant and Trader
7 年A very good, refreshing article Jonathan. Thanks
Indonesia Logistics, Ports and Airports CEO Advisor / Commissioner / BoC BoD C-suite / Indonesia market entry strategic execution
7 年A good summary Jonathan. Many of the sellers who fail are usually not mine owners but SPK ie contract to mine patches from the owner. Funding them is even riskier as no collateral. Unless some buuer is able to fund and mine themselves as well as arrange own logistics ie with sone royalties. No 100 pct safe answer.
President Director, PT Ombilin Energi
7 年Hi Jonathan, Having been in coal biz almost 30yrs now, basically there are good and bad buyers and sellers too. Whilst what you mentioned are true, I am surprised that there are still some sellers that thinks by receiving an Lc, they are able to get some funds from the bank. Little that they know unless they have facilities in the bank, no bank will provide some form of cash based on the incoming lc alone. In my opinion a vessel shipment success depends on coal availability n planning the loading schedules accordingly from the jetty to the anchorage. Buyers must maintain a close watch with the seller by means of a representative or surveyor report on the cargo readiness progress. Once there are delays, buyer can quickly take corrective actions. This will minimize losses n shipment failures.
President at FJDConsulting
7 年We have coal and can provide recent past performance.