India: Indonesian portside prices rise by INR 500/t on rallying index and domestic crunch

Portside prices of Indonesian coal have risen by INR 500-700/t w-o-w basis across various ports in India. Two factors that have fuelled the rise are:

• The sharp rise of $15-23/t in Indonesia Coal Index (ICI)
• Persistent Indian domestic coal supply shortage

Prices of the Indonesian 4200 GAR have risen by INR 500/tonne (t) (w-o-w) to INR 9,500/t at Kandla, while the same is assessed at INR 10,500/t at Navlakhi Port. Prices exclude cess and GST. Amidst lower inventory of 5000 GAR, prices are assessed at INR 10,100/t at Kandla. Portside prices of Indonesian 3800 GAR were assessed at INR 7,000/t at Kandla Port, up by INR 700/t w-o-w.

Last week, Indonesian imported coal prices for high-CV coal shot up by $23/t as China’s coal supply situation worsened with 20 provinces announcing power cuts.

Coal stockpiles at Indian power plants have declined sharply,  moving down to 7.31 million tonnes (mn t) as on 7 Oct’21, which are sufficient to tide over only four days of usage, as per data from the Central Electricity Authority (CEA).

Denying any threat of disruption in power generation, the government has assured of ample coal supply to power plants and has also increased gas supply to mitigate any impending crisis.

The non-power sector, on the other hand, continues to rely predominantly on imported supplies as domestic coal rake allotment remains nil.

Indonesian Coal Index (non-coking) prices

Prices in $/t

China’s worsening coal crisis

Despite the Golden Week holidays last week, Chinese traders continued to book Indonesian coal, while several mines in China’s Shaanxi region had to shut operations due to heavy rains and flooding.

According to reports, floods have closed down 60 of the 682 coal mines in Shanxi province, adding to a worsening energy crisis that threatens the country’s economic growth. Thermal coal futures on China’s Zhenzhou Commodity Exchange hit the upper limit at 1,408.3 yuan a tonne today, up 12% d-o-d.

The country’s state council on Friday raised the upper limit of electricity prices from 10% to 20% in order to mitigate the operating pressure of coal-fired power plants.

Despite the supply-boosting efforts of the government, the country could face a coal supply gap of 30-40 mn t in the Oct-Dec’21 quarter, industry reports claim. The ongoing coal shortage is also seen reducing industrial power usage by 10-15% in the upcoming months in the steel, chemicals, and cement sector.

Limited availability of spot cargoes

Indonesian miners are sold out for October and November amid Chinese huge demand. Meanwhile, rainfall continues to impact Indonesian coal supplies. Also Indonesian miners are compelled to prioritise their domestic market obligations and are left with little or no tonnage for exports in the spot market.

Outlook

CoalMint believes, portside thermal coal prices will remain elevated till domestic coal supplies improve in India.

On the other hand, imported Indonesian coal prices are likely to trade at higher levels amidst China’s robust downstream demand during its winter months.

The China Meteorological Administration has predicted a La Nina weather pattern between October and December, which may bring more frequent and stronger cold waves.