Indonesian coal prices strengthen further

Indonesian physical thermal coal prices increased again on 17 January, after Chinese buyers were forced to raise their bids in attempt to secure cargoes in a tightly supplied market.

Rain is still causing delays to vessel and barge loading operations in parts of Kalimantan, which is curbing supplies. And some suppliers may be holding cargoes back from the market amid expectations that prices could increase further in the run-up to next month's lunar new year holiday in China, which is exacerbating the supply tightness. January-loading cargoes are now all but sold out, while early February-loading shipments are also said to be tight.

Deal prices for February-loading geared supramax vessels of GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) coal have risen as this week has progressed. Trades involving this type of coal were concluded on 17 January at $32.75-33/t, which was up from similar deals a day earlier at $31.70-32.75/t and another shipment on 15 January that changed hands at $31.75/t. Offers have also increased this week, with February-loading cargoes available at around $33-34/t, with bids from Chinese buyers at around $32/t.

By comparison, a cross-month late January/early February-loading supramax cargo changed hands last week at $31.20/t, with an early February-loading shipment trading at the slightly higher price of $31.25/t. Other trades involving this type of coal were concluded at $30.40-30.60/t.

Argus last assessed fob GAR 4,200 kcal/kg cargoes on 11 January at $31.13/t, up by 79¢/t from the previous week.

Bids are also increasing in the ICI 4 derivatives market, which clears on the CME. January ICI 4 contracts were bid at $31.75/t on 17 January, up from $31.60/t a day earlier, with an offer at $32.50/t, up from $32.25/t. There were further signs that the market is also strengthening further along the curve, with February and March contracts both bid at $34.25/t. No ICI 4 trades were cleared by the CME, after 5,000t of January contracts traded on 16 January, which took the total volume cleared on the exchange so far this month to 70,000t and the total volume since the contract launched in February last year to 1.83mn t.

Elsewhere in the Indonesian market, fob prices of mid calorific value (CV) coal are being pushed up by strong demand from India. A particularly low-sulphur February-loading geared supramax, which was sold basis GAR 5,000 kcal/kg to a southeast Asian buyer, changed hands at $52.95/t, although Argus only assesses gearless Panamax shipments for this type of coal. This was considered above current market levels by some traders, who noted that a February-loading shipment of GAR 5,100 kcal/kg coal traded at $52/t, while offers of this type of product were heard at $53/t. Argus last assessed fob prices for GAR 5,000 kcal/kg coal at $48.36/t on 11 January, up by $1.21/t from the previous week.

The low CV market is also showing signs of strengthening this week. A February-loading geared supramax cargo traded at $20/t. By comparison, trades involving the type of coal were concluded last week in a $19-19.50/t range.

In the Australian seaborne coal market, another 100,000t of coal changed hands as the focus shifted to March-loading shipments, bringing the confirmed transaction volume for the week to over 700,000t.

One 50,000t shipment of NAR 6,000 kcal/kg coal with a minimum traded on-screen for $100.50/t fob Newcastle. March cargoes have already traded several times this week at that level, which is up from the Argus-assessed price of $96.77/t fob Newcastle on 11 January for NAR 6,000 kcal/kg coal, assessed with a slightly lower minimum of 5,700 kcal/kg.

A NAR 5,500 kcal/kg cargo of the same size also traded on-screen for $61.50/t fob Newcastle. The shipment represented one of the first March trades in a market that has been dominated by month-ahead deals.

In the China domestic market, more producers in Shaanxi raised fob mine prices, which supported fob port prices. Offers of NAR 5,500 kcal/kg coal were at 590-595 yuan/t today. But utilities remained quiet as power demand is set to slow soon with the arrival of the lunar new year holiday period. Still, stronger asking prices suggested a rise from Argus' last assessment, on 11 January, of Yn586/t fob Qinhuangdao ($86.60/t).

In China's futures market, the May contract on the ZCE closed at Yn583.8/t, up by Yn1.6/t on the day.