Amid an ongoing coal supply crisis in India, demand for Indonesian thermal coal continues to remain strong, catalyzed by end-users restocking on inventory before the monsoon begins. The absence of Chinese traders from the global market has restricted any significant rise in Indonesian coal prices resulting which Indian inquiries have remained stronger.
Indian demand for Indonesian 3400-5000 GAR was the highest due to their competitive rates and low volatile matter (VM) content. On the other hand, demand for high-CV Indonesian coal from Europe and Japan kept prices supported above $250/t FOB levels.
With regard to portside prices, 4200 GAR kcal/kg prices were assessed at INR 10,000/t at Kandla Port, while those of 5000 GAR kcal/kg were at INR 12,800/t. Prices exclude cess and GST.
“With limited scope of securing domestic coal, imported coal remains the only viable option. Majority of the stocks arriving in the upcoming week are already sold off,” a western-India based trader said.
Power utilities secure more imported coal this year
Amid increased power demand this year and rakes unavailability, the Indian government has mandated power companies to use coal blended with up to 30% of imported content till March next year. In addition to this, for the first time, domestic miner Coal India Ltd is set to import coal for state-owned power utilities, as shortages raise concerns about renewed power outages. This has supported demand for Indonesian coal from India.
As per CoalMint’s vessel line-up data, a total of 1.5 mnt of Indonesian coal is set to arrive at Indian ports between 30 May-15 June. Out of this, Adani Enterprise would bring the highest volume of 0.70 mnt, followed by Il& FS Tamilnadu Power and Reliance Industries at 0.07 mnt each.
Weaker Chinese demand
Demand from China, the top destination for Indonesia’s coal exports, continue to remain weak surrounding rising imports from Russia and sufficient availability of domestic coal.
The cheaper thermal coal prices in China, compared to last year’s continued to keep traders away from the imported market. The top economic planner, NDRC, has imposed a price cap on thermal coal to keep it within a reasonable range.
The Chinese government plans to further expand coal production capacity and exhort coal producers to strengthen supply to power generators, a government official stated, as per media reports. The government is looking to increase coal output in key mining hubs like Ordos in Inner Mongolia by expanding capacity at both opencast and underground mines here, the report said.
Short-term outlook
Demand for Indonesian coal is likely to remain strong in the coming weeks as the onset of monsoons in India may hamper domestic supplies and the absence of Chinese demand may restrict any major rise in imported rates.
However, as monsoons have already started in Indonesia, coal supplies from here may get constrained, which may keep prices supported.
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