Singapore’s SGX TSI coking coal derivatives open interest hits all-time high Mar 12

The SGX TSI FOB Australia Premium Coking Coal derivatives’ open interest hit a new daily record high Tuesday, with the trade of 24,805 lots, the Singapore Exchange said Wednesday.

Total open interest, futures and options combined, were equivalent to near 2.5 million mt on Tuesday, SGX said.

The last time the market saw a similar level of open interest in the coking coal market was on June 15, 2018.

Open interest is the total number of contracts outstanding in derivative markets on an official exchange. The long-term trend of total open interest for SGX TSI coking coal has shown a rise since January 2018.

According to the exchange’s data, the average open interest was 18,047 lots for 2018, futures and options combined. The open interest began to increase into 2019, with 24,805 lots settled for March 12, a jump of 24% over that of January 1, 2019.

Higher open interest represents new money coming into the coking coal market. It could also have been facilitated by increased volatility seen in the physical market. According to S&P Global Platts data, the steel raw materials market saw increased volatility early 2019, with iron ore leading the way due to the Vale incident. The coking coal market’s price volatility also increased to 23% in the physical market as of March 12, up 12.5 percentage points from January 1, 2019.

Calculated hot metal costs in a standard Chinese blast furnace show that the metallurgical coal input accounts for approximately 48% of the total cost, according to Platts data.

“Coke cost cannot be ignored in the process because it is an indispensable component of the burden mix, that will be watched closely,” a major Chinese steel mill source said.

S&P Global Platts assessed Premium Low Vol (PHCC) at $215.0/mt FOB Australia Tuesday, down 25 cents/mt day on day.
Source: Platts