ICI 4 coal derivatives prices edge lower

A total of 30,000t of ICI 4 derivatives contracts were cleared on the CME today at lower prices compared with similar transactions that concluded yesterday, underscoring an increasingly bearish sentiment in the Indonesian physical market.

Of today's trades, a 15,000t August clip traded at $33.65/t, with a 15,000t September contract trading at the same price. These followed a particularly active day yesterday, when a total of 100,000t of August and September ICI 4 contracts were cleared on the exchange in a $34-34.75/t range.

July ICI 4 contracts were bid today at $34.70/t and offered at $34.95-35.35/t with different Singapore-based brokers. August contracts were bid at $33.40-33.50/t and offered at $34.25/t, while September was bid at $33.10/t and offered at $34/t.

The decline in ICI 4 derivatives prices is underscoring an increasingly bearish sentiment in the Indonesian physical market, where prices are being pressured by weak demand from key buyers China and India, which is resulting in a supply surplus.

Details of firm transactions in the Indonesian GAR 4,200 kcal/kg market have been slow to emerge so far this week. But most bids for August-loading geared Supramax cargoes of this coal were around $34/t today, with offers around $35-35.50/t. Argus last assessed GAR 4,200 kcal/kg prices on 12 July at $35.88/t, 12¢/t lower compared with the previous week.

Trade was also muted elsewhere in the Indonesian market. An August-loading Panamax GAR 5,000 kcal/kg cargo possibly traded at $48.50/t, which was unchanged from a similar deal late last week.

The Australian market was also quiet today amid uncertainty following yesterday's announcement that the port of Caofeidian in China's Hebei province had put a freeze on customs clearances for imported coal cargoes. Market participants thinks the news may put downward pressure on the NAR 5,500 kcal/kg market, as it suggests the Chinese government may continue to adhere strictly to the import quotas it has set. There were reports of similar restrictions yesterday at the nearby Jingtang port, also located in Tangshan, Hebei.

China last year imposed stricter restrictions on imported coal in the last quarter of the year after the country exceeded its 2018 import quota. There is concern that the government could follow a similar policy this year.

Market participants pegged the market value of Australian NAR 5,500 kcal/kg coal at $53.50/t fob Newcastle today, in line with yesterday.

In the China domestic market, domestic prices at northern ports dropped to around 600 yuan/t ($87.30/t) today amid weak demand and high stocks.

Spot prices are approaching the level of monthly term contract prices, which were set at Yn599/t for July. Most market participants expect August monthly term prices to be set lower.

Coal stocks at the key transshipment port of Qinhuangdao increased by 90,000t from yesterday to around 6.26mn t today, the highest level since 4 June.

In China's futures market, the September NAR 5,500 kcal/kg contract on the Zhengzhou Commodity Exchange closed at Yn576.60/t, down by Yn7.40/t from yesterday.