Indonesia’s benchmark coal price index, also known as Harga Batubara Acuan, or HBA, rose close to its two-year high of $100.3/tonne (t) in Jun’21, up 12% month-on-month (m-o-m),according to a ministry official. In Oct’18, the HBA price had crossed the $100/t mark to $100.9/t.
What is HBA price?
The HBA is a month 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 globalCOAL 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 6,322kcal/kg GAR coal with 8% total moisture content, 15% ash as received and 0.8% sulphur as received.
HBA price rising since Apr’21
The Indonesian benchmark price has been recording an increase for the last three months due to increased coal demand from China. Shortage of domestic coal in China due to increased safety checks at mines and rising power demand due to recovery in industrial activities have resulted in enhanced demand for imported coal.
China’s altered trade dynamics with Australia have played a crucial role in the uptrend of the HBA price as Indonesia now exports the highest volume of thermal coal to China.
CoalMint’s data reveals China imported 9.82 mn t of thermal coal from Indonesia during Jan-Apr’21, up by 4% against the same period last year.
China’s strong buying interest in Indonesian coal has also prompted the Indonesian government to raise its coal production target to 625 mn t in 2021 up from 550 mn t pegged earlier. In 2020, coal production in Indonesia stood at 563 mn t.
Supply shortage in Indonesia supporting prices
Unforeseen heavy rains in Kalimantan provinces since the past few weeks have disrupted production and transportation of coal, keeping Indonesian thermal coal prices up.
Near-term outlook
The HBA price is expected to go up in July because demand from China is expected to remain elevated and even India is now back to booking Indonesian coal post relaxation of the second-wave lockdown restrictions in the country.
The correction can happen only if China announced import quotas on coal or these is any change in government policy that would promote domestic coal production and usage in that country.
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