The recently launched ICI 4 coal derivatives market achieved a landmark last month, as the total volume traded reached 1mn t, global energy and commodity price reporting agency Argus announced. This is a significant achievement, coming just six months after the clearing of futures settled against the index became available following the listing of ICI 4 on the CME’s Nymex exchange.
The physical market for low-calorific value Indonesian coal is growing rapidly. An estimated 120mn t/yr is being shipped from Indonesia for the export market, and an increasing proportion of this is being sold on an index-linked basis as market participants seek to manage Indonesian coal price risk. This has increased the need for effective risk management tools, and ICI 4 derivatives have become integral to meeting this hedging requirement.
Argus Media chairman and chief executive Adrian Binks said: “Passing this milestone in traded volumes proves that this contract has been widely accepted as an essential risk management tool for the growing Indonesian and wider Asia-Pacific market. Argus is delighted to have brought price transparency to the Indonesian coal markets.”
The ICI 4 index was launched jointly by Argus and PT Coalindo Energy in August 2008 and quickly gained the confidence of the coal trading community as a reliable, independent price assessment. The methodology is available here.