Indonesian coal derivatives show signs of strengthening

Indonesian thermal coal derivatives showed further signs of strengthening today, in line with a firming physical market.

In the ICI 4 derivatives market, 5,000t of January contracts were brokered by Singapore-based GFI at $31.90/t. This was higher than similar trades earlier this week when 5,000t of January ICI 4 derivatives contracts traded on 14 January at $31.65/t and a further 10,000t was cleared by the CME the following day at $31.80/t for January.

Today's trade means that a total of 70,000t of ICI 4 derivatives contracts have traded so far this month after 30,000t traded yesterday, taking the total volume cleared by the exchange since the contract launched last year to 1.83mn t.

In terms of bids and offers in the ICI 4 derivatives market, January was bid at $31.60/t today against an offer at $32.25/t. The market is firming further along the curve, with February and March contracts both bid at $33/t, with February offered at $34/t.

The firmer outlook for Indonesian derivatives is in line with a strengthening physical market, where a combination of rain-induced vessel loading delays in Kalimantan and an uptick in demand from key buyers China and India are supporting prices.

The current market situation is encouraging sellers to raise their offer prices, while deals were concluded today at higher prices than earlier in the week. Two February-loading GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) geared Supramax cargoes traded today at $31.70/t and $32/t. This was higher than a similar February trade concluded at the start of the week at $31.50/t. Offers for February-loading shipments of this type of coal were heard at $32.50-33/t, with bids at around $31.50-32/t today.

In the mid-calorific value market, prices are being boosted by strong Indian demand. February-loading Panamax GAR 5,100 kcal/kg cargoes were offered at $53-54/t, with a firm bid at $52/t. By comparison, a Panamax shipment of this coal traded last week at $50/t for February loading, while Argus last assessed prices of slightly lower quality GAR 5,000 kcal/kg (NAR 4,600 kcal/kg) coal at $48.36/t on 11 January, up by $1.21/t from the previous week.

In the Australian coal market, there was a noticeable uptick in liquidity today, supported by increased demand ahead of the lunar new year holiday in China and possible interest from Japan.

In the NAR 6,000 kcal/kg market, two index-relevant deals were concluded at the $100.50/t fob Newcastle level. Both were 50,000-75,000t March-loading cargoes. The price level was up significantly from trades done on 14 January in the $97-97.25/t fob range for February-loading product.

Two 25,000t cargoes also transacted today for $100.50/t and $101.25/t fob Newcastle, but were too small to be included in the index.

In the high-ash market, February-loading NAR 5,500 kcal/kg coal traded at $60.80/t for 100,000t and at $62.50/t for 130,000t fob Newcastle. Both were included in the index. A 35,000t February-loading parcel also traded at the $60.80/t fob level but was not included in the index.

The two larger cargoes of high-ash coal reported today in the $60.80-62.50/t range compare with slightly smaller index-relevant trades yesterday in the $60.25-61/fob Newcastle range.

In the China delivered market, a NAR 5,500 kcal/kg Capesize cargo was heard to have changed hands at $70.30/t cfr south China, but the loading period was not confirmed.

In China's domestic spot market, producers in Shaanxi raised fob mine selling prices by as much as 70 yuan/t amid coal mine shutdowns following a fatal accident in the province. Overall fob port prices edged up slightly, with traders raising offers of NAR 5,500 kcal/kg coal to as high as Yn590/t fob northern China ports. This compares with Yn585/t at the beginning of the week.

In the China's futures market, the May contract on the ZCE closed at Yn582.2/t, up by Yn7.2/t on the day.