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Shell re-enters coal with swaps trading

By Jacqueline Cowhig

LONDON | Thu May 17, 2012 12:16pm BST

May 17 (Reuters) – Shell International Trading and Shipping Company Ltd this month resumed trading in coal derivatives more than a decade after parent Royal Dutch Shell exited the coal business and sold its mines, sources close to the company said.

Shell declined to comment.

Shell actively trades power, gas and carbon so the move back into coal fills a gap in the energy markets it trades and will enable more effective spread-trading and hedging, they said.

“It’s coal swaps only for hedging and spread-trading,” one source said.

With the emissions market moribund because of Europe’s economic problems, coal swaps are the most effective hedge against gas, they added.

Shell sold its Australian, South African, U.S. and Venezuelan coal assets 11 years ago. At that time coal prices were depressed and the market was opaque, illiquid and dominated by long-term contracts.

BP also sold off its coal assets, leaving Total the only oil major with coal mines and a physical trading book.

(Reporting by Jacqueline Cowhig, graphic by Henning Gloystein; editing by Jason Neely)

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