Key Highlights:
—Indonesian thermal coal offers to India have moved up by $1-2/t this week amid increased demand from power plants, chemical and textile companies based in coastal belt in India.
—CoalMint learned from market sources that 4200 GAR grade Indonesian coal is currently being offered at $34-36/t. Whereas, the 3600 GAR coal is at around $30/t, CFR Kandla basis.
—The freight for panamax vessel is assessed to be around $9-9.5/t.
Indonesian coal prices supported by Indian demand
—Since March, when the nationwide lockdown was announced in India, the demand for Indonesian coal plummeted significantly, thus affecting its prices.
“With Indian economy returning back to normalcy and monsoon season coming to an end, various chemicals and textiles companies especially in western belt of India are ramping up their production capacity leading to increased demand for Indonesian coal”, quoted a reputed trader based in Gujarat.
—Apart from this there are talks in the market that China (the biggest importer of Indonesian coal) would ease import restrictions amid tighter domestic supplies and higher prices, thus providing support to Indonesian coal index and its offers to India this week.
—In case of India, although government announced its intentions to curb imports this year and increase domestic coal production, the inhouse transportation costs and quality continue to remain prime concerns for the coal buyers based in coastal regions.
—Indonesian coal is also being preferred by cement manufacturers in India for blending purpose.
“We are getting good CV Indonesian coal at much lesser price as against the domestic coal which makes it an attractive option”, quoted a cement manufacturer based in Southern India.
Fall in CIL’s production and dispatch
—Coal India data shows that in FY21 starting Apr-Aug’20, its coal production stood at 195.5 mn t against 210.2 mn t in same period last year.
—CIL’s coal dispatch also recorded a drop of 13% y-o-y during Apr-Aug’20 at 208.3 mn t.
“Coal India is not increasing its production as demand has still not increased for domestic coal and keeping a high inventory is also not feasible as over time its CV value decreases due to high moisture content during monsoons”, remarked a market participant based in Central India.
Future outlook:
Indonesian coal is likely to observe a considerable price recovery by mid-December amid improved demand from India, production cut by Indonesian miners, and Chinese buyers back to booking Indonesian coal as new quotas for imports would be announced starting January.
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