Indonesian low-CV coal prices hold steady

The uncertain demand outlook for the coming weeks and months is dampening physical trade. As such, bids and offers were scarce, although a total of 10,000t of ICI 4 coal derivatives were cleared on the CME as market participants sought to hedge their price exposure further along the curve.

Expectations of weaker Chinese demand this year have prompted Chinese coal producer Shenhua Energy to reduce its production and sales targets for 2020. The company has set its 2020 coal production target at 268mn t, down by 5.2pc on the year. It has set its sales target for this year at 403mn t, down by 9.9pc from 2019. The sales figures include the coal Shenhua Energy produced and sold and the coal it bought from other producers to resell.

Indonesian coal producer Bayan Resources is set to halt production at two of its mining subsidiaries until 30 April as a precautionary measure amid the global coronavirus pandemic.

Its Tabang and Fajar Sakti Prima units operate mines in Indonesia's east Kalimantan province and produce a combined 28mn t/yr of coal with a calorific value of GAR 4,400 kcal/kg.

Bayan said its other mines, barging operations and ports, including Balikpapan and Lubuk Tutung, are operating normally and it has enough inventories to continue supplying its customers for up to three months.

Bids and offers in the GAR 4,200 kcal/kg Indonesian market were scarce. A first-half April-loading geared Supramax cargo was bid today at $31/t against an offer at $32/t. May-loading cargoes of the same coal were bid at around $30.50/t and offered at around $31.50/t.

Argus last assessed the GAR 4,200 kcal/kg market at $31.55/t on 27 March, down by 39¢/t from the previous week and the lowest since September last year.

A total of 10,000t of ICI 4 futures traded on the CME at $31.80/t, comprising 5,000t clips for June-July this year. April futures were bid at $31.40/t and offered at $32/t. By comparison, the last Argus settlement price for April ICI 4 futures was at $31.90/t on 27 March.

In the Australian high-ash market, bids for May-loading Capesize cargoes of NAR 5,500 kcal/kg coal were around $51/t fob Newcastle. Offers were around $53.50/t, with April cargoes mostly sold out.

Demand from China, a key buyer of Australian high-ash coal, is weak, with domestic production outpacing a gradual increase in consumption. Coal inventories at the key coal transshipment port of Qinhuangdao surged to 6.71mn t as of yesterday, an increase of 210,000t from a week earlier to reach their highest level in over four months. Combined daily coal burn at China's six main coastal utilities edged up to 605,300 t/d yesterday from 599,400 t/d on 26 March, although this was still lower than 716,200 t/d on the same day last year.

Chinese spot coal prices held steady, with bids for NAR 5,500 kcal/kg coal at around 538-540 yuan/t fob north China ports, while offers were around Yn540-543/t fob, largely unchanged from 27 March.

But the weak Chinese demand outlook contributed to a sharp decline in Chinese thermal coal futures. The May contract on the Zhengzhou commodity exchange closed at Yn517.70/t, down by Yn5.50/t from 27 March. The September contract touched an intra-day low of Yn499.20/t, before closing at Yn501.60/t today, down by Yn14/t from 27 March.