Indonesian coal prices are likely to continue downtrend as China is moving to restrict imports, while facing tougher competition in Indian market from US coal, traders said on Friday, Nov. 30.
China, the world’s top coal buyer, reportedly was considering extend restrictions on coal imports until the end of February next year, according to market participants. In order to keep imports levels below that of CY17, the government would be mulling a potential extension of import restrictions at ports.
While Chinese authorities have not confirmed the extension, the news has dampened the market. If China went ahead with the import restriction, it will disrupt sales of seaborne coal schedule for January and February next year.
Prices of most-traded Indonesian coal of 4200 GAR has fallen nearly 35% since the start of this year as China’s demand is waning. Miners are offering 4200 GAR at USD 30-31/MT for shipment in Supramax vessel, gear-to-gear this week, from around USD 34-35/MT in the previous week.
“China is still very adamant about curbing their import policy. In the coming years, their imports policy is going to be stricter than this year,” said a trader in Jakarta.
Because of the stricter guideline, he said, China may not in a rush to release coal import quota for next year. But China’s coal import quota next year may be at the same amount of this year at 271 MnT, the Jakarta trader said.
However, the government-backed China national coal industry association and the general administration of customs have separately agreed to reduce the 2019 import quota from this year’s quota.
Another trader based in Mumbai said despite a stable purchase from India, it’s not enough to stem the decline in prices.
“Demand is essentially from China. When China buys, price move upwards,” said the Indian trader. And “there’s no enquiry from China.”
With the market are on the way down, Indonesian miners are only fulfilling existing commitments, with some miners offering December loading.
China’s decision to cap imports may also push U.S. producers to find another market, the Jakarta trader said. Some cargoes at unknown quantity and price were heard to be shipped to India recently, the Jakarta trader said.
If U.S. coal started to flow to India, the country has found an alternative supplier, which could shrink Indonesia’s share in the country.
“They (U.S. coal producers) maybe send the coal to Indonesia because they can’t ship it to China,” said the Jakarta trader. “If the U.S. market is as desperate as us, I think they will work out workable prices for India,” he said.
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