Indonesian coal futures trade for January

Indonesian ICI 4 coal futures traded for the second consecutive day today, marking the resumption of transactions in the new year after a slowdown in December during the holiday season.

A January contract for 10,000t cleared on CME at $31.50/t after Asian trading hours today, brokered by Marex Spectron. This compares with a trade yesterday at $31.80/t for 5,000 t/month in the first quarter of 2019, brokered by Evolution Markets.

This takes the total cleared on CME so far this week to 25,000t, after a slow December when total trade dropped to 40,000t — well down on the 200,000-265,000 t/month recorded in the three preceding months.

China's clampdown on physical coal imports at the end of last year and uncertainty about Beijing's policy direction on coal imports in January contributed to more caution on the part of traders in both the physical and paper markets, some traders said today. Many remain uncertain about the outlook for the first quarter.

Meanwhile, first quarter 2019 ICI 4 paper was bid at $31.50/t today, with little seen on the offer side. February was marked by one broker at a mid-price of around $31.80/t.

Traders and producers said Chinese and Indian inquiries increased in the physical low-CV and mid-CV market this week ahead of the new year holiday. One deal for a February loading Panamax was heard done at $31.35/t for GAR 4,200 kcal/kg (NAR 3,800) coal. But many others said they were either waiting for clearer signals from the Chinese government on import policy, or said they were focusing on a tender issued by Chinese state-controlled utility Huaneng on 4 January.

Huaneng surprised the market by taking more cargoes than expected, with most done on a cfr south China or cfr east China basis in yuan/t. Most were low CV GAR 4,200 kcal/kg cargoes from Indonesia, with tender prices recorded around $30-30.50/t for geared vessels after the calculation of netbacks to a fob South Kalimantan price.

Mid-CV coal sold on a NAR 4,800 (GAR 5,150) basis to Huaneng in south China for delivery in February at the dollar equivalent fob price of $47.50-48/t once netted back to south Kalimantan and taking Panamax freight rates into account.

Loading delays in South Kalimantan, where rains have been heavy, helped to tighten supply slightly along with the large Huaneng tender. This encouraged sellers to raise their offers today and some bids crept up very slightly in response.

In the spot fob Indonesia GAR 4,200 kcal/kg market for geared vessels, most bids were around $30.75-31/t for cross-month January-February cargoes or February cargoes. But one February bid was as low as $30/t. Offers were around $32-32.50/t today, in line with yesterday.

In the Panamax market for GAR 4,200 kcal/kg coal from Indonesia, one firm bid was reported at $31.50/t for February loading, while a producer with ultra-low sulphur coal said a bid he received at $31.70t/t yesterday was raised to closer to $32/t today. Offers were reported as low as $31.50/t for February, although there were other Panamaxes of this quality offered at $31.75, $32 and even $33/t for February, depending on sulphur levels.

Australian high-ash coal

In the Australian coal market, a February-loading Capesize cargo of NAR 5,500 kcal/kg coal was bid at $59.20-59.50/t fob Newcastle and offered at $60.50/t on screen, while a Panamax cargo for the same time period was bid at $59/t and offered at $61/t fob Newcastle. That is generally in the range of bids and offers from last week.

In the higher-CV market, a 25,000t February-loading cargo of NAR 6,000 kcal/kg coal traded on the Global Coal screen for $97.50/t fob Newcastle. But this was too small to be included in the Argus index.

In the China domestic market, prices for spot NAR 5,500 kcal/kg coal at northern China ports fell slightly to around 595 yuan/t fob on a lack of bullish economic news. Meanwhile, some trading companies were under pressure to repay loans so were trying to clear out their stocks before the lunar new year holiday, which also put downward pressure on domestic prices.

In China's futures market, the actively traded May 2019 contract on the ZCE retreated further, falling by Yn3.4/t to close at Yn561.4/t today.