The Indonesian Coal Index (ICI) for low-calorific value (CV) coal rose by $3.4/tonne (t) for 4,200 GAR and $4.16/t for 5,000 GAR week-on-week (w-o-w). The same are currently assessed at $58.44/t and $83.80/t, FoB basis, respectively. The index for high-calorific value (CV) coal also rose by $4.28/t for 6,500 GAR to $103.99/t, FoB.
Prevailing tight supply in the country amid spells of heavy rain has so far disrupted coal shipments from Indonesia as cargo availability is seen under pressure for Jun and Jul’21, informed market participants.
Inquiries from China have been rising sharply as the Chinese Cabinet recently lifted restrictions on coal imports for a few Chinese provinces until the end of June to meet its requirements ahead of the peak summer season.
Demand from India, however, remained muted as major coal consuming sectors continue to remain on the sidelines amidst higher coal prices and resilient vessel freight rates.
China relaxes June import quota
In an attempt to cap a sharp rise in China’s domestic coal prices, the Chinese authorities last week lifted restrictions on coal imports for a few Chinese provinces until the end of June.
China’s Jiangsu, Zhejiang, Fujian and a few other provinces were heard to have gradually relaxed the customs clearance norms on imported coal.
The country has been stocking up on coal in sufficient quantities to prevent blackouts in its manufacturing hubs amidst rebound in industrial activities as it recovers from the Covid-19 pandemic rapidly.
However, market experts believe the relaxation of the import restriction might not be enough as robust demand from the country continues to exceed supply amid China’s ban on Australian imports.
Tight supply in Kalimantan
Disruptions from irregular weather and heavy rains in parts of Kalimantan have continued to prevent miners from returning to normal production levels in the region.
Lower cargo availability over the last few months also continue to disrupt shipments.
CoalMint’s vessel-line up data reveals, Indonesia’s coal exports to China rose 59% m-o-m to 12.1 mn t last month, while exports to South Korea rose 58% to 1.11 mn t. Exports from south Kalimantan recorded a sharp increase of 19.8% m-o-m at 10.2 mn t in May’21, while the same from east Kalimantan rose by 2.6% to 16.4 mn t due to strong Chinese demand.
Indian portside prices inch up, but demand subdued
Amid the surging index and freight rates, portside prices for Indonesian coal rose slightly last week. However, demand from major sectors such as power and cement continued to remain under pressure as rising imported coal prices prompted them to go into a wait-and-watch-mode.
Coal supply at Kandla also remained higher as shipments originally planned for smaller ports like Magdalla were heard to have been shifted to Kandla last month, while lockdown restrictions disrupted vessel discharge at Navlakhi, Dahej, and Hazira ports.
Portside prices for 4,200 GAR grade thermal coal rose slightly by INR 100/t w-o-w to INR 5,350/t ex-Kandla, and for 5,000 GAR to INR 6,500/t ex-Kandla for advance payments category.
The current freight for supramax vessels between Indonesia and India is currently assessed at $23-26/t which was at $11/t in Jan’21.
Short-term outlook
According to CoalMint’s analysis, Indonesian thermal coal prices are likely to rise further as China is seen stepping up its purchases after the authorities lifted the Jun’21 import quota.
With a warmer-than-expected summer season this year in the country amid constrained domestic supply, Chinese authorities are most likely to relax further restrictions on coal purchases throughout the summer season.
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