The rally in Indonesian thermal coal prices doesn’t seem to be losing steam. The Indonesian Coal Index (ICI) for the low-calorific value (CV) material rose by $3.3/tonne (t) for the 4,200 GAR grade and $1.8/t for the 5,000 GAR w-o-w. The same are currently assessed at $61.75/t and $85.62/t, FoB, respectively.
The index for the high-calorific value (CV) 6,500 GAR also rose by $2.1/t to $106.09/t, FoB.
Demand from China remained buoyant last week after the authorities stalled coal production at many of its mines due to safety inspections, subsequently prompting traders to lean back on imports.
Coal stocks at China’s largest coal terminal, Qinhuangdao have been assessed at 5.06 million tonnes (mn t), down by 30,000 tonnes against the same time last month. Coal stocks at the northern ports in China totalled 20.7 mn t, down by 2.43 mn t against last month.
Indian portside trade subdued
Amidst heavy rains, trading activities at several ports in India took a hit. Magdalla Port was heard to have been closed down due to rains, while vessel discharge at Navlakhi, Dahej and Hazira ports were disrupted.
Coal supply at Kandla, on the other hand, rose sharply as the shipments originally planned for the smaller ports continued to be shifted to Kandla.
According to market participants, enquiries for low-CV coal had surfaced since the last few weeks, while demand for high-CV coal generally used by the power plants and cement mills remained lower.
“Smaller industries which resumed operations after easing of lockdown restrictions are purchasing low-CV Indonesian coal in smaller quantities, while the cement and power plants have already accumulated stocks for the monsoon season,” an Ahmedabad-based trader said.
Indian power utilities have thermal coal stocks of 31.04 mn t which are sufficient for 17 days, as per National Power Plant data.
Further, amidst heavy rains in most parts of the country, plants buying domestic coal also faced difficulty as supply from CIL’s coal subsidiaries were reported to be lower alongside a sharp rise in transport costs.
Portside prices for the 4,200 GAR rose slightly by INR 100/t w-o-w to INR 5,450/t ex-Kandla due to an increase in the index , while prices for the 5,000 GAR remained stable at INR 6,500/t ex-Kandla in case of advance payments.
The current freight for Supramax vessels between Indonesia and India is currently assessed at $27/t which was at $11/t in Jan’21.
Indonesian miners asked to ramp up output
Amidst tight supply in the country, Indonesia’s coal mining association (APBI) recently called on companies to ensure sufficient domestic supply as importers were seen focusing more on exports after prices surged following China’s robust demand.
The Ministry of Energy and Mineral Resources also suggested enforcing a compensation fine to ensure sufficient domestic supply to tackle the situation before blackouts occur and also hinted at imposing a compensatory fine on companies which fail to fulfill their Domestic Market Obligation (DMO) this year.
The DMO requires coal producers to sell 25% of their total planned output domestically.
Expectations of lower exports in the near-run also kept Indonesian thermal coal prices higher, informed market participants.
Furthermore, irregular rains in parts of Kalimantan fuelled supply concerns from the country as spot cargoes were heard to be sold out till July.
“Generally, prices tend to ease during monsoon. But, this year, the story is different. With sky-high freight rates and weak demand in India, very few vessels are scheduled to arrive from Indonesia in the next two months,” a Surat-based trader said.
Short-term outlook
According to CoalMint’s analysis, Indonesian thermal coal prices are likely to remain elevated amidst strong demand from China and dwindling supplies from Indonesia.
Demand from India, on the other hand, is likely to remain subdued until at least the ongoing monsoon season.
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