ICI 4 coal derivatives trade out to 1Q 2020

The ICI 4 coal derivatives market traded out to the first quarter of 2020 late yesterday, the first trades cleared into next year since the contract launched in February 2018.

Interest has been building further along the curve and a number of third and fourth-quarter 2019 trades cleared for the first time last week, with more cleared on the CME so far this week. But yesterday's first-quarter 2020 trades were the furthest out to date.

A total of 111,000t of ICI 4 derivatives contracts traded late yesterday after Asia-Pacific trading hours. The first-quarter 2020 traded in two lots/month at $40.70/t, while the third and fourth quarters of 2019 traded at $40.30/t for 10 lots/month and 15 lots/month respectively.

An ICI 4 April contract also traded yesterday at $39.60/t, down from closing at $40.50/t on 8 March, even as the prompt spot market remained tight amid weather disruptions.

Yesterday's trades means 491,000t of ICI 4 contracts have traded so far this month, taking the total volume since the contract launched last year to just under 2.6mn t.

The derivatives market was more subdued today after yesterday's flurry of trades. April contracts were bid at $39.20-39.40/t and offered at $39.60-39.75/t with Singapore-based brokers. Third-quarter 2019 contracts were bid at $40/t and offered at $41.25/t.

The Indonesian physical market was also relatively quiet. There is a view among some traders that buyers are opting for the market sidelines waiting for a clearer sense of direction to develop. But supplies remain tight because of heavy rain across parts of Indonesia, with deals relatively slow to emerge this week and bids holding relatively steady even as offer prices are edging higher.

Two April-loading GAR 4,200 kcal/kg cargoes traded at $39-39.35/t, which was broadly in line with similar trades last week. But offers are being kept high by the supply tightness, with at least one seller offering an April supramax shipment of this coal as high as $43/t, while a bid was at $41.50/t.

Demand for low-calorific value (CV) product has increased as prices of other grades have risen. An April-loading GAR 3,400 kcal/kg cargo traded at $23.50/t, which was up compared with a cross-month late March/early April loading supramax cargo of the same coal that traded last week at $22.75/t.

Price volatility in the Australian coal market has increased as market participants try to grapple with the effects of stricter and somewhat patchy Chinese controls on Australian imports.

An April-loading Capesize cargo of NAR 5,500 kcal/kg coal traded today for $58.50/t fob Newcastle, up from a $56.50/t fob trade over the weekend. This specification was also bid at $56/t fob and offered at $58/t fob, while a Capesize cargo loading in late April or early May was bid at $58/t fob and offered at $59/t fob.

The NAR 5,500 kcal/kg price was most recently assessed by Argus at $58.15/t fob Newcastle on 8 March.

In the higher CV market, a 25,000t April-loading clip of NAR 6,000 kcal/kg coal traded on screen for $92.50/t fob Newcastle. No April cargoes were confirmed traded last week, but 25,000t cargoes transacted last week at $96.90-97/t fob Newcastle for May loading.

Prices in the Chinese domestic market were stabilising as more mines are expected to reopen later this week and next week. Offers of NAR 5,500 kcal/kg coal were around 640 yuan/t fob north China ports today compared with Yn640-645/t late last week. Utilities bid the coal at Yn630-635/t. The bids and offers indicated a drop from Argus' last assessments of Yn642.33/t ($95.36/t) fob Qinhuangdao on 8 March.

China's futures market saw the Zhengzhou commodity exchange May contract close at Yn593.80/t, edging up by Yn1/t from yesterday.