ICI 4 coal derivatives market begins to stabilise

There were signs that the ICI 4 thermal coal derivatives market was beginning to stabilise today, after a total of 35,000t of June contracts were cleared on the Chicago Mercantile Exchange (CME) at slightly firmer prices than similar trades that were concluded earlier this week.

The slight increase in prices today was possibly the result of short-covering by traders following recent Chinese utility tenders, some of which sought low calorific-value (CV) Indonesian material.

Chinese state-controlled power utility Guodian earlier this week issued a tender to buy 695,000t of imported thermal coal, all for delivery to its power plants in east China's Jiangsu province to meet peak summer demand. The tender, which closed on 4 June, included one request for six 45,000t cargoes of imported coal for delivery to Taizhou port from 1 July to 15 August, including a cargo of NAR 3,800 kcal/kg (GAR 4,200 kcal/kg) product.

Fellow Chinese utility Huaneng was also heard today to have awarded a Supramax NAR 3,800 kcal/kg cargo at 338 yuan/t ($49/t) on a cfr basis, which nets back to a fob value of $33/t.

Of today's trades, a 5,000t June ICI 4 clip traded at $35.65/t on the CME. This was followed by two June clips of 15,000t and 10,000t at $35.50/t. Another 5,000t June clip traded later in the day at a slightly higher price of $35.80/t. All of today's trades bar the 10,000t June clip were brokered by Singapore-based Evolution.

The $35.50-35.80/t range at which today's June contracts were cleared on the CME was marginally firmer than the $35.25-35.45/t levels at which June contracts were cleared on the exchange earlier this week and late last week.

June ICI derivatives were bid today at $35.55/t and offered at $35.80/t. This is broadly in line with 4 June, when June was bid at $35.45/t and offered at $35.70-35.85/t with different Singapore-based brokers prior to a public holiday in Singapore yesterday.

Today's trades mean 45,000t of ICI 4 derivatives contracts have now traded so far this week, taking the total volume to have been cleared on the CME to 3.725mn t since the contract's launch in February last year.

Trade in the Indonesian physical spot market was muted today because of a week-long public holiday in the country. In addition, Chinese markets will be closed tomorrow for a public holiday.

A July-loading Supramax GAR 4,200 kcal/kg cargo traded at $35.75/t, while a June-loading cargo of the same coal traded at a higher price of $36.25/t. Bids for July-loading geared Supramax cargoes of this coal were at around $35/t, while offers were around $36-37/t today.

In the Australian thermal coal market, a Chinese buyer purchased a Panamax cargo of NAR 5,500 kcal/kg coal at $54.50/t fob Newcastle for July loading. The shipment was heading to a non-China destination. Bids were at $54.20/t fob Newcastle and offers were at $55/t fob Newcastle for July-loading Capesizes.

In the Chinese domestic market, NAR 5,500 kcal/kg coal was heard to be trading around Yn590-600/t on a fob northern China ports basis today.

In China's futures market, the ZCE September contract closed at Yn582/t, up by Yn576.80/t from yesterday.