Indonesian thermal coal prices rose marginally in the last two weeks despite Chinese demand resurfacing following an intense heatwave in the country.
However, any significant rise in Indonesian prices, especially for mid-CV coal (5500 kcal/kg NAR) popularly used by Chinese power plants, was limited due to Beijing’s cap on their domestic 5500 NAR prices.
China’s top economic planner has set a cap for 5500 kcal/kg NAR coal at RMB 570-850/t ($83-123/t). Currently Indonesian 5500 kcal/kg NAR grade coal prices are being heard at $165/t.
Along with this, the cheaper availability of 6000 NAR grade Russian coal in China has also restricted any rise in demand for Indonesian high-CV coal. A total of 12 mnt of Russian thermal coal was imported during January-July 2022, CoalMint notes.
Chinese buyers have been raising enquiries for booking mainly low-CV (3400-4200 GAR) Indonesian coal. Demand for power-generation via coal-fired plants has increased in the country since July-end due to reduced hydropower generation amid droughts.
However, some signs of temperature cooling at some parts of the country this week also slowed down bookings.
“We don’t expect the hot spell in China to go for long… We expect Indonesian prices to remain in a range. Exports to Europe are lower as of now, but the challenges in logistics are being treated,” said an Indonesia-based trader.
Indian buyers move to the sidelines
In the last two weeks when Chinese demand was quite strong and Indonesian coal was being offered at a premium, Indian buyers moved to the sidelines as they were reluctant to pay high price.
Also, India’s domestic coal production has improved this year. The output rose by 15% y-o-y at 521 mnt during January-July 2022. The same is expected to increase in August.
Recently, the Indian government has annulled its 10% blending directive for power plants that was introduced in late April this year. This already made a few Indian buyers to adopt a wait-and-watch mode.
With concentrated efforts of coal companies and stringent measures taken by the government, the coal inventory at Indian power plants has increased to 30 mnt as on 28 August, 2022, sufficient for 14 days of power generation.
Only power utilities in the coastal belt were heard procuring low-to-mid CV Indonesian coal for rebuilding stockpile, while bookings from the non-power sector were rising in a staggered manner as manufacturing units would slowly resume operations post-monsoon.
Short-term outlook
With easing of high temperature in China, demand for Indonesian coal would also ease in the upcoming weeks which may pull its prices down. However, Chinese utilities are expected to begin restocking for winters from mid-September that would provide some support to prices.
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