Indonesian coal prices continue to remain elevated, with high-calorific value (CV) coal prices moving up further by $6/tonne (t) on a weekly basis amid the slowdown in coal production in that country and strong demand from China.
Flash floods and record heavy rainfall in South and East Kalimantan provinces further disrupted coal production, as authorities in South Kalimantan’s Tanah Bumbu regency declared a state of emergency until 17 Sept’21.
Several miners have called for force majeure on deliveries amid flooding at mines, while other affected producers are heard to be delaying laycans. Most Indonesian miners are also under pressure to ensure deliveries to domestic power utility Perusahaan Listrik Negara (PLN).
The fast spread of COVID-19 infections at mine sites has also affected port and mining operations, informed market participants.
“There are several loading disruptions at Indonesian ports as the waiting time has increased considerably. Though a few large-scale miners have sufficient coal stocks at ports that are scheduled for delivery, mid-sized miners are the most-affected at present,” a Mumbai-based importer pointed out.
Indonesian thermal coal prices
| Grade | Aug’21 W4 | Sept’21 W1 | w-o-w change |
| 3400 GAR | 43.42 | 44.35 | 0.93 |
| 4200 GAR | 73.04 | 74.98 | 1.94 |
| 5000 GAR | 107.56 | 108.85 | 1.29 |
| 5800 GAR | 124.12 | 125.90 | 1.78 |
| 6500 GAR | 131.97 | 137.50 | 5.53 |
Prices in $/t
China resumes winter restocking in advance
After experiencing a supply deficit situation since late last year, Chinese power utilities have begun winter restocking last week. Several Chinese utilities issued thermal coal tenders ranging from 3,800-5,300 GAR coal for Sept-Oct’21 delivery.
The restocking comes against the backdrop of higher domestic thermal coal prices in China, and the lower-than-expected coal stockpiles at power plants and ports in the country.
Coal inventories at the six coastal power groups were at 12.47 million tonnes (mn t) as on 5 Sept’21, which is sufficient to cover 16 days of use, down from 15.81 mn t last year (as on 7 Sept’20) sufficient for 24 days of power generation, industry report showed.
According to market participants, several coal mines coming onboard in China in Aug and Sept are unlikely to fill the supply gap in the country in the upcoming months given its enormous power demand.
Indian enquiries for Indonesian coal pick up
Owing to an acute domestic coal shortage, enquiries of low-to-mid CV Indonesian coal picked up over the last two weeks. However, lower cargo availability from Indonesia and resilient coal prices continued to dampen sentiments, capping any major bookings.
Indonesian 3400 GAR to 4800 GAR were being offered at a premium of $2-3/t to Indian importers as a few end-users booked bulk cargoes last week. Imports for stock and sale, however, remained lower amid concerns whether prices would gain acceptance back home, informed market participants.
Meanwhile, weak coal inventory levels at power plants continue to keep the coal supply situation at a ‘super critical’ level. As on 5 Sept’21, coal stocks had fallen 12%, w-o-w, to 11.74 mn t (sufficient for only 6 days of use) compared to 13.37 mn t assessed on 28 Aug.
Although the government has asked thermal plants to import coal, most power companies remained on the sidelines as electricity prices are constant for long-term contracts.
Amidst low availability, portside offers of 4,200 GAR coal in Kandla were at INR 7,200/t, while offers for 5,000 GAR in Kandla were at INR 8,150/t, in case of advance payments (prices exclude cess and GST).
Outlook
CoalMint believes, Indonesian coal prices are likely to remain elevated in the near-term amid only a lower number of vessels discharging from Indonesian ports due to floods and force majeure at ports.
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