Indonesia’s benchmark reference price also known as Harga Batubara Acuan (HBA) for February is at $87.8/t, up by 16% m-o-m as the same stood at $75.8/t in January, according to a ministry official.
The country’s benchmark price had been continuously falling since May’19 majorly due to coal import restrictions in China and India as well as competition from Australia and Russia in markets such as Japan and South Korea.
In the first nine months of 2020, prices were adversely impacted due to pandemic induced lockdown in most countries and a subsequent drop in energy demand. The HBA price had started moving up from Oct’20.
The increased demand from China (key importer of Indonesian coal) amid colder-than-usual winters, domestic coal shortage and informal ban by China on Australian coal has lent support to the Indonesian HBA price in last quarter of 2020. Also, the improvement in industrial activities in other key importing countries like Japan, South Korea and India has also bolstered Indonesian coal demand and HBA price.
The HBA is a monthly average price based 25% each on Platts Kalimantan 5,900 kcal/kg GAR assessments, Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR), Newcastle Export Index (6,322 kcal/kg GAR) and global COAL Newcastle (6,000 kcal/kg NAR).
It is the basis for determining the prices of 77 Indonesian coal products and calculating the amount of royalty producers have to pay for each metric tonne of coal sold. It is based on 6,322 kcal/kg GAR coal with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
Indonesia exceeds 2020 coal production target
Indonesian coal production also exceeded the government’s 550 mn t target for 2020, with output at approximately 563 mn t. But this was down from 616.2 million t in 2019, when domestic consumption totaled 138 mn t, energy ministry data show. In Dec’20, Indonesian coal shipments to China reached an all-time high at 17.5 mn t.
Outlook
Over past two weeks, Indonesian coal prices have seen a drop ahead of Chinese Lunar New Year holidays. However, market participants believe that prices would once again pick up post 15 February when Chinese buyers are back in the market. While there are strong rumours that China would do away with the ban on Australian coal, this is not happening anytime soon which is why HBA prices are expected to remain uplifted in the next month also.
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