ICI 4 derivatives trade at prompt end of curve

ICI 4 derivatives contracts traded again today, with another 5,000t clip of July contracts cleared on the Chicago Mercantile Exchange (CME) at prices similar to transactions done last week.

But activity in the physical market was fairly muted, even though bids and offers for lower calorific value (CV) coal have picked as a result of market support offered by several Chinese utility tenders.

A prompt 5,000t July ICI 4 clip traded at $36/t on the CME earlier today, brokered by Singapore-based GFI. This was little changed from last week when a total of 55,000t of July clips traded in a $35.70-36.10/t range, but much higher compared with the 48,000/t of fourth-quarter trades earlier in the week at $35.20-35.30/t and two 5,000t August clips at $35.85/t.

Bids and offers with different Singapore-based brokers for July contracts were up marginally from those yesterday. July was bid today at $35.60-35.85/t compared with $35.60-35.75/t yesterday, while offered at $36.15/t that was up from $36/t yesterday.

Today's trades mean 63,000t of ICI 4 derivatives contracts have traded so far this week, taking the total volume cleared on the CME since the contract was launched last year to over 3.9mn t.

Trading in the physical Indonesian coal market was muted again. But recent Chinese utility tenders, seeking just under 2mn t of mostly lower CV coal, have seen buying interest firming through the week.

Bids and offers for GAR 4,200 kcal/kg coal were firming further ahead in August. Bids for end-July/early August loading geared supramax cargoes of this coal were at around $35.50-35.75/t, while offered at around $36-36.25/t. Similar cargoes of this coal loading later in August were bid higher at $36.75-37/t and offered at $37-37.50/t.

The Australian thermal coal market saw a 75,000t cargo of NAR 6,000 kcal/kg coal traded at $72/t fob Newcastle today on screen for September loading. This fits the Argus index and is firmer than the most recent Argus price assessment of $69.54/t fob Newcastle last week.

The high-ash market had a Capesize cargo of NAR 5,500 kcal/kg coal offered at $52.50/t fob Newcastle for August loading. But some Chinese buyers remained reluctant to take imported cargoes because of policy uncertainty and the possibility that some ports in China are full.

Demand in China's domestic thermal coal market continued to be sluggish as daily coal consumption at the six major coastal power plants fell by 15,100 t/d to 641,400t yesterday. Stocks at the power plants were sufficient to meet demand for 29 days yesterday, up from 28 on the previous day.

Some spot NAR 5,500 kcal/kg coal deals were done at around 608 yuan/t fob north China ports, down slightly from yesterday's Yn610/t. Trading activity was limited and buyers only purchased enough to cover their immediate needs.

China's futures market had the actively traded September thermal coal contract on the Zhengzhou commodities exchange fall by Yn3.60/t from yesterday to close at Yn585.40/t today. The futures price was at around a Yn22.60/t discount to the spot price.