Indonesian coal prices, derivatives tick higher

A total of 15,000t of ICI 4 coal derivatives was cleared on the CME today, amid further signs that the low-calorific value (CV) Indonesian physical market is strengthening.

Today's ICI 4 derivatives trades comprised two 5,000t November clips traded at $33/t and a 5,000t October clip traded at the slightly lower price of $32.80/t. All of today's trades were brokered by Singapore-based Evolution.

October contracts were later bid at $32.50/t and offered at $32.95/t. By comparison, the last Argus settlement price for October ICI 4 futures was at $32.70/t yesterday, when the November settlement price was at $32.90/t.

The strengthening in the derivatives market follows a recent uptick in prices of physical Indonesian coal, which is being driven partly by renewed interest from Indian buyers that are seeking post-monsoon cargoes.

A first-half October loading geared Supramax GAR 4,200 kcal/kg cargo changed hands today at $32.50/t, in line with the current broad $31.50-33/t bid and offer range for September- and October-loading shipments.

Prices also appear to be firming slightly elsewhere in the Indonesian market, although details of fresh transactions have been slow to emerge. An October-loading GAR 5,000 kcal/kg Panamax cargo was bid today at around $47/t. There were no corresponding offers, although Argus last assessed prices of this coal on 6 September at $46.11/t.

In the Australian market, a 25,000t clip of NAR 6,000 kcal/kg coal traded at $67.75/t fob Newcastle for December loading. But that was too small and not prompt enough to fit the index that is now covering October- and November-loading cargoes.

South Korean utilities yesterday and today issued spot tenders seeking a combined 2.97mn t of coal during the fourth quarter. Some of that was minimum NAR 5,700 kcal/kg coal that could be supplied from Australia. The five state-owned utilities are seeking 905,000t of this grade of coal, with maximum 0.8pc sulphur, in a joint tender. State-owned Korean Western Power (Kowepo) is also seeking 315,000t of this type of coal in two separate tenders.

But participants expect the market to remain oversupplied while Japanese demand stays weak amid higher nuclear generation and strong inventory levels, so it is not clear that the emerging Korean demand will provide much of a boost to the market.

Coal prices in China's domestic market continued to pick up this week amid an expected supply shortage during upcoming maintenance on the Daqin railway line. Tradeable prices of NAR 5,500 kcal/kg coal were at around 585 yuan/t today, market participants said. This was up from Argus' last assessment of Yn582.42/t fob Qinhuangdao ($81.27/t) fob on 6 September.

In China's futures market, the November contract on the ZCE closed at Yn591/t today, up by Yn0.6/t from yesterday.