The Indonesian ICI4 index has been moving up for almost a month now as popular grade 4200 GAR has risen by $11/t m-o-m and is currently being assessed at $47.7/t, FoB basis.
On the other hand, 6500 GAR prices have moved up by $5/t m-o-m at $89.9/t and that of 3400 GAR is up by $3/t at $25.7/t in April.
Domestic coal supply constraints in China
Amid ban on Australian coal, there is strong buying for Indonesian fuel from China as the domestic coal production in the country is being curbed by increased safety inspections at coal mines following several fatal accidents at mines across China.
While operations at some of the coal mines in Shanxi province have been suspended indefinitely for breaching safety protocols, corruption probe into Inner Mongolia’s coal sector since Mar’20 and rising COVID cases there have also restricted thermal coal supplies into China.
The thermal stockpiles at Chinese ports are unusually low for this time of the year (down by 34% y-o-y) when the air-conditioning demand peaks in summer.
The Chinese importers are rushing to book seaborne cargoes despite high freight rates in anticipation that they can recover their costs when prices would rise further in the summer when supply is expected to be tight.
On the other hand, Indonesia continues to face supply tightness in coal amid the ongoing Ramdaan festival and the supply crunch is likely to last for a month, informed market participants.
Indian demand weakens amid rising COVID cases
In case of India, the buyers are that have been shying away to make any import coal bookings amid escalated freights have become further wary of booking due to rising COVID cases.
Although there have been inquires in the market for Indonesian coal few days back with April-May being restocking season, sudden surge of COVID cases especially in last one week have made buyers to retreat amid lockdown fear.
CoalMint’s vessel line-up reveals about 3.77 mn t of thermal coal arriving at Indian ports between 14-27 April with highest quantity coming at Mundra port followed by Navlakhi.
Portside prices for 3600 GAR grade thermal coal have been heard at INR 4,100/t ex-Magdalla and for 4200 GAR at INR 5,500/t ex-Kandla today.
What lies ahead?
With Chinese buyers looking for bookings till June-July, power utilities seeking replenishment of stocks, and no significant increase in China’s domestic coal production likely, Indonesian thermal coal prices are set to increase further in the coming weeks.
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