Trade increases in ICI4 coal derivatives market

Price falls in the Indonesian physical thermal coal market accelerated today, although trade in the ICI 4 derivatives market that clears on the CME increased with a total of 20,000t of December contracts cleared.

The latest trades mean 160,000t of ICI 4 derivatives have traded this month, taking the total volume to have cleared the exchange since the contract launched in February to more than 1.68mn t. The highest monthly volumes to date were traded in September and October when 260,000t and 265,000t respectively cleared on the CME.

The Indonesian physical market saw fob prices of the actively traded GAR 4,200 kcal/kg coal fall again today. There are signs that the price falls are accelerating, with offers for first-half December loading shipments of this coal slipping below $30/t.

The GAR 4,200 kcal/kg market has moved into contango, with offers for shipments that are scheduled to load during the first half of December now available at a steep discount compared with cargoes for loading later in the month. Sellers ofcargoes of this coal that are destined for China are struggling to reschedule loading dates amid concerns that last week's announcement of tighter import restrictions could result in buyers defaulting on shipments. But sellers are more confident that they will be able to find alternative markets for cargoes that are scheduled to load later in the month. As such offer prices for these shipments are slightly higher.

Unconfirmed details began to emerge that two early December-loading geared supramax cargoes of GAR 4,200 kcal/kg coal may have traded at $29/t and 29.50/t respectively. This compares with similar trades late last week at around $30.80/t. Offers for early December loading geared supramax cargoes of this coal were also around $29.50/t, although shipments for loading later in the month were available at the slightly higher price of $30-31/t. A bid for a first-half December loading Panamax shipment of the same coal was at $28/t. By comparison, a December-loading Panamax cargo traded late last week at $30.85/t, although Argus does not capture Panamax shipments of this type of coal in the index.

Argus last assessed GAR 4,200 kcal/kg prices at $32.04/t on 16 November, $2.48/t lower than the previous week.

Trade was sparse elsewhere in the Indonesian physical market, although prices of mid-calorific value (CV) coal appear to be holding relatively steady in comparison to lower CV product. This is partly because this type of coal is often sought by South Korean utilities, and as such is not as exposed to Chinese policy changes to the same extent as lower quality Indonesian material such as GAR 4,200 kcal/kg.

An offer for a December-loading Panamax cargo of GAR 5,000 kcal/kg coal was at $49/t today against a bid at $48/t, while a bid for December-loading shipment of slightly higher quality GAR 5,100 kcal/kg product was also at $48/t. Argus last assessed fob GAR 5,000 kcal/kg prices at $48.91/t on 16 November, down by $1.18/t from the previous week.

Offers in the Chinese market of NAR 5,500 kcal/kg domestic coal were at 630-635/t yuan on a fob north China basis today, with bids from utilities no higher than Yn630/t. This was up slightly from yesterday, when offers were at Yn630/t and utilities' bids were around Yn625/t fob for the same coal.In China's futures market, the Zhengzhou commodity exchange's January contract closed at Yn618.40/t today, up by Yn6.40/t from yesterday.

The Australian market saw a 75,000t January 2019 loading NAR 6,000 kcal/kg cargo trade on screen at $98.50/t. By comparison, a 25,000t February-loading NAR 6,000 kcal/kg cargo traded on screen at $98.25/t on 19 November, although this falls below the 50,000t minimum requirement for inclusion in the Argus index. A 25,000t December-loading cargo traded last week at $102/t, while a January cargo of the same volume traded for $105.55/t.