Despite the recent rise in imported Indonesian coal prices, its portside rates have remained firm over the past two weeks amid disparities in bids and offers.
While domestic users of Indonesian coal have moved to the sidelines and are making need-based purchases, sellers are preferring to hold stock and have been rigid against lowering their offers in expectation of a rise in Indonesian prices in the coming weeks.
Portside prices of Indonesian coal
*Price in INR/t
According to market participants, portside trade is taking place in limited quantities with end-user units operating at reduced capacities amid monsoons (rains result in very high moisture content in coal). Also, during the rainy season, every year, some ports on the western coast suspend operations, which impacts portside trade volumes.
“Monsoon, inflationary pressures, and wet coal have resulted in the Indian textile and chemical sectors working withlimited capacities,” said a Gujarat-based trader.
In mid-August, th Indian government annulled its directive of 10% coal blending for power plants that was issued in April-end due to very hot summers and surge in power demand. This has resulted in a drop in portside coal purchases by the power sector.
In addition, cooler temperatures due to the monsoon have also resulted in lower power demand in the country.
“Independent power plants are being less aggressive in buying as they are not actively maintaining stock. They already have accumulated decent stock in recent months and domestic coal supply also remains strong,” a north India-based trader said.
As on 12 September 2022, coal stockpiles at Indian power plants were assessed at 27 mnt, sufficient for 14 days of consumption. Stocks had declined to their lowest at 22 mnt in April.
Imported Indonesian coal prices rise
Indonesian coal prices have risen slightly by $3-5/t in the current week amid increased inquiries from China due to an extreme heatwave and winter restocking activity. Indian buyers have also started making bookings for October-November delivery.
Europe is also looking to import more of Indonesian and Australian coals with gas supplies from Russia being completely suspended a few days back. In July 2022, Indonesia exported 44 mnt of thermal coal to Europe, a jump of 31% y-o-y, 6% m-o-m, and the highest for July since 2014.
The offers for branded Indonesian coal to China and India are trending at a premium of 3-6/t over index while the premiums for Europeare even higher , informed participants.
Short-term outlook
Portside Indonesian coal trade is expected to pick up by the end of the month in India as the monsoon subsides and manufacturing units resume operations. Imported coal procurement, on the other hand, continues to gain momentum amid fears that prices may rise in the near future amid tight supply from Indonesia and winter restocking activity in Europe and Asia.
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