The Indonesian Coal Index (ICI) declined by up to 20% on a m-o-m basis in the third week of Dec’21 amidst weak Chinese demand as the coal production there has increased and domestic prices have also fallen considerably.
| Grade | Nov’21 W3 | Dec’21 W3 | w-o-w change in $/t |
| 3400 GAR | 45.7 | 43.9 | -1.9 |
| 4200 GAR | 70.7 | 65.8 | -5 |
| 5000 GAR | 106.2 | 98.2 | -8 |
| 5800 GAR | 126.8 | 123.8 | -3 |
| 6500 GAR | 147.5 | 150.9 | +3.4 |
China’s imported coal demand started slowing down in Nov’21 post-its winter procurement in Sept-Oct’21. However Indonesian coal prices have remained supported over Nov-Dec’21 due to supply constraints amid heavy rains.
Although the supply scenario has improved in Indonesia currently, demand from China continued to drop further, resulting in a price fall this month.
The most-active Zhengzhou thermal coal futures contract for Jan’22 delivery were traded at RMB 744/t as on 17 Dec’21 against RMB 852.4/t a month back for December delivery.
China’s crackdown has limited impact on domestic prices
Last week, China launched a nationwide campaign to crack down on illegal mining, days after 22 workers were trapped in an unauthorised coal quarry following heavy flooding. However, this has limited impact on domestic coal prices as the same has come down further by RMB 50/t ($8/t) w-o-w.
Subsequently, only a few inquiries from China are being heard and that too for low-CV coal. Demand is limited, with power plants seeking some cargoes to substitute delayed deliveries.
Domestic production also continued to rise over the last few months to meet its rising winter demand as data from the National Bureau of Statistics (NBS) shows that the country’s raw coal production stood at 370 mn t in Nov’21, an increase of 4%, m-o-m.
Indian demand remains tepid
Indonesian coal procurement from India has been consistently weak (since the past few weeks) as domestic coal supplies have improved for the power sector and also falling imported prices have made buyers adopt a wait-and-watch mode in hopes of further fall.
Coal stocks at Indian power plants stand at 21.7 mn t, sufficient for 11 days as against 17.9 mn t last month.
The portside price of 4200 GAR is assessed at INR 7,200/t (t) ex-Kandla, while that of 5000 GAR is at INR 9,500/t. Prices exclude cess and GST.
Short-term outlook
Indonesian coal prices are expected to move down further amid sluggish demand from China and weak trading activities globally on account of Christmas holidays. The only support to Indonesian coal prices would be limited availability of coal in the spot market as many deals have been already concluded for Jan’22.
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