Activity rises in ICI 4 thermal coal derivatives market

Activity increased in the ICI 4 thermal coal derivatives market today, with a total of 75,000t of May and June contracts cleared on the Chicago Mercantile Exchange (CME), mostly at lower prices compared with recent similar deals.

A 20,000t clip of June ICI 4 derivatives traded earlier today at $38.80/t, brokered by Singapore-based GFI. This was lower than yesterday, when a 10,000t June clip traded at $39/t. Today's trade was followed by three clips of May contracts totalling 35,000t, brokered by Singapore-based Evolution. These trades comprised a 10,000t, a 15,000t and another 10,000t clip that all traded at $39.25/t. These contracts were done at lower prices than May trades last week, when two 10,000t clips traded at $39.50/t. Later in the day another 10,000t clip for June traded at $39/t, which was followed by two 5,000t June contracts that traded at $38.70/t, brokered by GFI.

Bids and offers for May contracts were broadly in line with levels in the market yesterday, although bids and offers for June fell. May was bid today at $39/t and offered at $39.50/t. This compares with bids at $39-39.30/t and offers at $39.40/t yesterday. June was bid today at $38.50/t, down from $39-39.50/t yesterday and offered at $39/t, down from $39.15/t yesterday.

Today's trades mean 85,000t of ICI 4 contracts have traded so far this week, bringing the total volume to have been cleared on the CME so far this month to 190,000t.

Physical prices of Indonesian coal were relatively steady today, although activity was muted because of sluggish demand from key buyers China and India. Chinese buyersare also being deterred by a weaker yuan against the US dollar. China's central bank today set its official currency rate at a four-month low of Yn6.8365 to the dollar today amid a continuing trade rift between the US and China and the imposition by both countries of higher import tariffs.

The GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) physical market saw most offers still above $40/t for June-loading supramax cargoes. A seller was offering cargoes at $41/t and another at $41.25/t. But details began to emerge than another seller was offering June-loading cargoes at the lower price of $39/t.

Bids were scarce today, although one buyer was bidding for a June-loading geared supramax GAR 4,200 kcal/kg cargo at $39/t.

The lower calorific value market saw offers for June-loading supramax GAR 3,400 kcal kg cargoes at around $23-24/t, while a bid was at $23/t. The bid-offer spread for June shipments of this coal was little changed compared with late last week.

The Australian market was also quiet amid the depreciation of the yuan against the US dollar. This is limiting demand from China, the key buyer for high-ash Australian NAR 5,500 kcal/kg coal.

The Chinese domestic market saw offers of NAR 5,500 kcal/kg coal around 620 yuan/t fob on a north China ports basis, while bids were around Yn615/t.

China's futures market saw the Zhengzhou commodities exchange September contract close at Yn603/t today, down by Yn4.20/t from yesterday.