India: Portside prices of Indonesian coal remain range-bound amidst global volatility

Portside prices of Indonesian coal remained rangebound this week amid volatility in global prices, with coal import prices falling further.

Prices of 4200 GAR coal are at INR 8,000/tonne (t) ex-Kandla, while 5000 GAR material is changing hands for INR 11,000/t amid low demand from buyers and the expected arrival of new vessels in the coming weeks. Prices exclude cess and GST.

Portside Indonesian coal prices have remained at largely similar levels for the last three weeks due to the weak buying appetite of wide range of industries along with improved domestic coal supplies.

Offerings by Coal India Ltd. (CIL) and its subsidiaries in a series of auctions held in Nov witnessed an exponential growth of 19.47 million tonnes (mn t) against 1.62 mn t in Oct and 5.08 mn t in Sept.

Fluctuations in imported Indonesian coal prices

The Indonesian Coal Index (ICI), which rose a week back, declined again this week as Chinese traders stayed on the sidelines amid sagging demand from power plants, with the upcoming month of Jan being a weak trading month due to the Chinese New Year holidays. Moreover, there is a mismatch between lower bids from the buyers and high offers from the sellers.

Tight supply in Indonesia this year due to heavy rainfall in that country is limiting any sharp fall in prices, despite the fact that producers having already fallen short of their output targets.

Indonesian coal price

China’s NDRC drafts long-term coal contracts

Following fluctuations in China’s domestic coal prices, the country’s major coal mines completed the signing of the first batch of medium- and long-term coal supply contracts for 2022, totalling more than 260 mn t, at a higher benchmark price set by National Development Reform Commission (NDRC).

China’s top planning authority has drafted a new price mechanism wherein the benchmark price has risen from RMB 535/t to RMB 700/t, an increase of 31%. This is expected to set the tone for domestic thermal coal price movements in China for 2022.

Outlook

Indonesian coal demand from China could increase if there is an unexpected cold spell in China that might hamper domestic coal supplies. In case this scenario materialises, Indonesian coal prices are expected to rise once again.

However, portside prices in India may remain in a tight range until there is dramatic rise in import prices as domestic demand for Indonesian coal has turned weak amid improved supplies from CIL and its subsidiaries.