Indonesian Coal to Offer Better Price Realisation in CY17

Indonesian coal prices would yield higher gains in CY17, as the average thermal coal benchmark price has registered stronger growth on the yearly basis.

Coal reference price HBA (or Harga Batubara Acuan) has increased 39% Y-o-Y to USD 85.9/MT in CY17, against USD 61.8/MT recorded in CY16.

The HBA (for thermal coal) forms the basis for determining prices of 77 Indonesian coal products and calculating the royalties that coal producers need to pay for each metric ton of coal they have sold.

Indonesian energy Ministry sets HBA price on the monthly basis which is the average of four domestic and international coal prices, namely the Indonesia Coal Index (ICI), Newcastle Export Index (NEX), Globalcoal Newcastle Index (GCNC), and Platt’s 5900 GAR coal assessment.

Coal reference price has recorded growth on the month since Jun’17, but has slightly fell 0.84% M-o-M to USD 94.04/MT in Dec’17 compared with USD 94.84/MT in Nov’17. The decline in Dec’17 is attributed to the fall in coal demand from China where authorities had restricted coal imports.

HBA price in Dec’17 was also 7% lower on the year than the levels seen during the same month in CY16.

Of late, Indonesian coal market has found support from improving economic growth and development of coal-fired plants in Asian region, but China still remains the major controller of the coal prices.

Last year, the Chinese government had imposed 276-day work rule during May’16-Nov’16 for coal mining sector. As a result, Chinese buyers were on a buying spree in the import market to meet their demand and hence the HBA price had touched a year-high value of 101.69/MT in Dec’16.

Although the Chinese government had relaxed the 276-day cap in 2017, yet the domestic coal production was not enough to sustain the growing coal demand. Hence Chinese coal imports were high this year and had supported Indonesian coal prices.

At present, Indonesian spot coal offers have started to move upwards, on the backdrop of winter restocking needs in China. Market participants have anticipated that the coal prices are likely to remain firm until Chinese buyers restock ahead of the New Year holidays, only after which prices would start falling.