After remaining subdued so far this month amid the Golden Week Holidays and the Communist Party meet, Indonesian thermal coal prices are likely to rise in the coming weeks as winter comes closer. This has prompted Chinese power utilities to secure supplies.
Elevated domestic coal prices in China have given a price advantage to Indonesian coal. Mid-CV Indonesian 5500 NAR prices are $48/t cheaper over China’s local prices for a similar grade.
Strong European demand for Indonesian supplies are also seen as incentivising its prices as shipments to the Netherlands rose sharply by 300% to 0.21 mnt last month, while that to Poland, Italy, and Spain remained higher y-o-y, as per CoalMint data.
With record-high profits this year, several large-scale Indonesian miners are in talks with European buyers for coal exports during the coming winter, helping the country gain a $5-billion (bn) trade surplus in September.
Rise in Chinese coal prices
The increase in Chinese domestic coal prices has compelled power utilities there to seek overseas coal with strong buying interest shown for lower-CV stock. Buyers are even willing to pay a premium of $3-5/t.
China’s portside thermal coal prices remained elevated since September amid persistent supply constraints following Daqin maintenance, safety inspections, and Covid-19 flare-ups.
However, the government’s priority in ensuring energy supply in winter may also cap a major rise in prices as coal production and transport are seen stabilising post the maintenance of the Daqin line that will end during late October.
The Chinese government has mandated that during winter, cement and some other industrial plants will have to curtail production and suspend operations in part or fully in winter to reduce pollution.
India’s demand remains steady
Import inquiries from Indian buyers are currently weak amid rising supplies of domestic coal to the power sector. During the first nine months of the year, India’s coal output rose by 14% y-o-y to 637 mnt, while dispatches rose by 11% y-o-y to 641 mnt.
Moreover, bulk bookings turned weak amid reduced industrial activities during the festive season. Rising Russian coal demand in several chemical industries, which are predominant buyers of Indonesian supplies, was also seen dampening Indonesian coal import demand.
Outlook
Strong demand from China and Europe is seen supporting Indonesian coal prices in the near term, while demand from India is seen as firm.
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