Indonesian thermal coal prices show signs of firming

The Indonesian physical thermal coal market showed further signs of strengthening today, with Chinese buyers actively seeking cargoes ahead of next month's lunar new year holiday.

Few physical deals were heard to have been concluded, although traders reported a higher-than-usual number of enquiries for a Monday, while supplies remain tight because of recent rain-related delays to vessel-loading operations in parts of Kalimantan. There is also a view among some market participants that suppliers may be holding cargoes back from the market amid expectations of further price increases this week.

In the actively-traded GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) market, bids for February-loading geared shipments were at $33.50-33.50/t today, with an offer at $34/t. A February-loading gearless Panamax cargo of this coal was offered at a higher price of $35/t, although Argus does not assess this cargo size for this type of coal.

By comparison, geared GAR 4,200 kcal/kg cargoes for loading in February increased last week, as suppliers raised their offer prices and buyers were forced to raise their bids in attempt to secure cargoes in a tightly supplied market. Deals involving February-loading Supramax cargoes of this type of coal were done earlier last week at around $31.50-31.75/t, with other cargoes trading as the week progressed in a $32-33.25/t range.

Argus last assessed GAR 4,200 kcal/kg cargoes on 18 January at $32.38/t, up by $1.25/t from the previous week and the highest since mid-November 2018.

In the ICI 4 derivatives market, which clears on the CME, bids for January and February contracts also showed signs of strengthening today, although actual trades were scarce. January ICI 4 derivatives contracts were bid today at $31.70/t with a Singapore-based broker against an offer at $32.20/t. February contracts were bid at $33.75/t and offered at $35.25/t. By comparison, January and February were both bid on 17 January at $31.75/t and in a $33-34.25/t range, respectively.

Elsewhere in the Indonesian market, prices were also showing signs of increasing, although details of firm transactions were again scarce.

In the GAR 5,000 kcal/kg (NAR 4,600 kcal/kg) market, a February-loading gearless Panamax shipment was offered today at $54.50/t. A particularly low-sulphur February-loading geared Supramax cargo, which was sold basis GAR 5,000 kcal/kg to a southeast Asian buyer, traded at $52.95/t last week, 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 at $53/t.

Argus last assessed prices of this coal on 18 January at $50.01/t, up by $1.65/t from the previous week.

In the Australian market, enquiries appear to have slowed relative to last week's burst of activity, which saw at least 100,000t worth of deals done on the first day of the week alone. The NAR 5,500 kcal/kg market rose by $1.04/t to $61.43/t fob Newcastle on 18 January on the unusual burst of activity. Seven trades representing 540,000t of coal were confirmed in the market last week. The slowdown this week could signal the approach of what is typically a quieter period before the week-long lunar new year holiday.

In the Chinese domestic spot market, offers held flat from late last week at 595-600 yuan/t fob northern China ports. Utilities, which had already slowed their buying activity because of the approaching holiday, remained quiet.

In the China's futures market, the futures price retreated on the news that mines in Yulin, Shaanxi province, and Ordos in Inner Mongolia, will increase production late this month and next month. The May contract on the ZCE closed at Yn587.8/t today, down by Yn3.8 from last Friday. But some market participants expect actual production will not rise significantly.