Indonesian coal prices hold steady as rains ease

Physical prices of Indonesian coal held steady but there is a sense that the market could begin to soften, as weather-related supply disruptions begin to ease and Chinese customs authorities warn about high import volumes.

Jhonlin, a large producer of low-calorific value (CV) coal, last week declared force majeure on shipments because of a flooded mine in south Kalimantan following heavy rain. The company has since resumed operations at its GAR 3,800 kcal/kg mine with the onset of drier weather in recent days but has not yet resumed its GAR 4,200 kcal/kg operations.

Other producers, including PCN that also declared force majeure on shipments, said earlier this week it was also struggling to meet their sales commitments because of heavy rain. But the onset of drier weather could mean output begins to rise at a time when China's general administration of customs (GAC) has warned about high import volumes this year.

The GAC circulated a warning notice to local customs authorities, asking them to "pay close attention to import levels to better supervise coal imports and limit the imports of low-quality coal", market participants said. China's main economic planning agency the NDRC has also asked the GAC to reinforce the management of coal imports, as "the supervision of coal imports is an important part of the national strategy of coal capacity cuts", the GAC said.

In the GAR 4,200 kcal/kg market, a July-loading geared supramax cargo traded at $36/t, with bids at around the same price. Offers for this type of coal were at around $36.20-36.50/t, which is broadly in line with levels in the market yesterday.

Trade was slow in the ICI 4 derivatives market, which clears on the CME. June contracts were bid at $35.75/t, down from $36.25/t yesterday. and offered at $36.25/t that was down from $36.50/t yesterday. By comparison June ICI 4 derivatives last traded on 13 June when a 15,000t clip was cleared on the CME at $36.45/t.

The Australian market saw a July-loading Capesize bid at $51/t and offered at $52.50/t fob Newcastle. A 25,000t cargo of August-loading NAR 5,500 kcal/kg coal was bid at $54/t fob Newcastle, although that is not index relevant as it falls below the minimum cargo size.

NAR 6,000 kcal/kg coal from Colombia was also offered into the Asia-Pacific market, where it competes with high-CV Australian coal, at $49/t fob Colombia for a July-loading Capesize. Spot rates for Capesize vessels operating on the Colombia-China route are currently at around $19-20/t.

By comparison, the price for Australian NAR 6,000 kcal/kg coal was assessed at $71.39/t fob Newcastle most recently on 14 June, with Panamax freight in a $11-14/t range for delivery to east Asian buyers Japan, South Korea and China.

China's market had domestic NAR 5,500 kcal/kg coal offered at around 598-600 yuan/t fob north China ports, with bids from utilities at Yn590-595/t.

China's futures market saw the September Zhengzhou commodities exchange contract close at Yn596/t, down by Yn2/t from yesterday.