ICI 4 coal derivatives prices hold steady

A total of 35,000t of mostly June ICI 4 thermal coal derivatives contracts traded on the Chicago Mercantile Exchange (CME) today at similar prices compared with recent similar deals.

Of today's total volume, a 10,000t May clip cleared on the CME at $39.25/t, brokered by Singapore-based Evolution. This was the same price at which three trades comprising a total of 35,000t of May contracts traded yesterday. Of today's 25,000t of June trades, 20,000t of which was brokered by Singapore-based GFI, two 5,000t clips and a 15,000t clip each traded at $38.70/t. This was at the lower end of the price range at which yesterday's June trades were cleared on the CME, when two 5,000t clips also traded at $38.70/t and a 10,000t contract was cleared on the exchange at the higher price of $39/t.

Today's trades mean that 120,000t of ICI 4 derivatives contracts have traded so far this week, taking the total volume so far this month to 225,000t.

Bids for May contracts edged down slightly to $38.90/t today compared with $39/t yesterday. But May offers were steady at $39.50/t. Third-quarter 2019 contracts were offered at $39.30/t, although there were no corresponding bids, while fourth-quarter 2019 contracts were bid at $35.45/t and offered at $39.45/t. By comparison, the most recent fourth-quarter 2019 trades were cleared on the CME last week, with 5,000 t/month each for October, November and December done at $38.20/t.

Despite the recent increase in activity in the ICI 4 derivatives market the Indonesian physical market remains muted. High utility inventories in China and India are dampening demand. Chinese buyers are also being deterred from purchasing seaborne coal by the recent depreciation of the yuan against the US dollar, which is making imported coal that is priced in dollars more expensive.

Amid the lack of activity in the physical market this week, there is a sense that prices could soon begin to soften. This view is mainly being driven by the lack of demand and subsequent lack of bids. A bid, possibly from an Indian buyer, for a June-loading GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) Supramax shipment was at $39/t, while offers were in a $39.50-41/t range. By comparison yesterday, a seller was offering June-loading cargoes of this coal at $41/t and another at $41.25/t. But another seller was offering June-loading supramax cargoes at the lower price of $39/t.

The Australian thermal coal market saw a handful of small NAR 6,000 kcal/kg trades done on screen today, although these did not meet the minimum 50,000t cargo size for inclusion in the Argus index. Two July-loading 25,000t fob Newcastle clips traded at $86.25/t and $85.75/t. An August-loading fob Newcastle clip of the same size traded at $85.50/t. A 50,000t NAR 6,000 kcal/kg clip for June traded on screen late in the Asia-Pacific business day at a $6/t discount to the index, suggesting how steeply prices are falling.

Demand for high-calorific value Australian coal has been weak. Japan, which is the main buyer of this type of coal, had a mild winter and is well stocked.

The Chinese domestic market saw offers of NAR 5,500 kcal/kg coal unchanged from yesterday at around 620 yuan/t fob north China ports. Bids from utilities were no higher than Yn618/t fob, although this was up slightly from Yn615/t yesterday.

China's futures market saw the Zhengzhou commodities exchange September contract close at Yn600.60/t today, down by Yn2.40/t from yesterday.