India: Portside Indonesian thermal coal prices soar in wake of Russia-Ukraine crisis

Indonesian thermal coal prices at Indian ports have increased on the back of a sharp rise in the index prices as the ongoing tension between Russia and Ukraine continues to keep global prices higher.

The SWIFT sanctions on Russia have compelled several coal-consuming countries to aggressively book cargoes from Indonesia, South Africa, and Australia, adding pressure to the persistent tight supply.

Amidst limited inventory at Indian ports, prices for 4200 GAR have risen by INR 2,000/t w-o-w at INR 12,000/t, while that of 5000 GAR were assessed at INR 14,000/t, up by INR 1,000/t w-o-w at Kandla. Prices exclude cess and GST.

The rise has come amidst a surge in demand among end-users as they rushed to secure inventory amidst expectation of rates surging further in the coming days.

“Amidst limited domestic supply from CIL and its subsidiaries, majority of end-users are relying more on imported coal supply even as prices rise sharply,” a Surat-based trader said.

Also, amidst a sharp rise in pet coke prices, several cement manufacturers were also heard to be procuring Indonesian coal.

Tight supply persists in Indonesia

Heavy rainfall at key mining regions in Indonesia and lack of cargo availability continued to keep coal supply tight, with miners holding offers for the upcoming months.

According to the Indonesian Coal Mining Association, domestic miners may experience a renewed coal export curb in April or August this year given the typically low mine output at the time.

Ever since the coal supply crunch in Indonesia started (at the beginning this year), the government has been ensuring sufficient supply at local power plants, compelling miners to meet their domestic market obligation (DMO).

Meanwhile, rising inquiries from Chinese traders for mid-low CV Indonesian coal further supported the sentiment as power utilities in the country rebuild inventory before the summers.

Short-term outlook

Indonesian coal prices are likely to remain higher amidst increasing imported coal prices surrounding supply constraints and geopolitical tension.