- Highest-CV coal rises for 4th straight month
- Prices of lower-CV grades remain almost flat
Mysteel Global: Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has raised its thermal coal reference price (Harga Batubara Acuan or HBA) of the highest-grade material (6,322 kcal/kg GAR) for the present 1-15 March period, while prices of the three lower-calorific grades remain almost flat, according to the ministry’s latest release.
The move marks the ESDM’s first index issuance under a new bi-monthly update system (issued on the 1st and 15th day of each month), aimed at better reflecting market dynamics, and replaces the previous practice of once a month.
This change is part of a broader push by Jakarta to have this domestic reference index system adopted to settle export deals as the government attempts to ramp up the global pricing power of Indonesia, the world’s largest thermal coal exporter.
Specifically, the HBA for 6,322 kcal/kg GAR coal (TM 12.26%, sulphur 0.66%, ash 7.94%) – a grade with high CV – was set at $128.24/tonne (t), up by 3.2% from a month ago, the release showed. This rise extended a four-month upward trend observed since last November, when the index was set at $114.43/t.
The HBA-I price, gauging mid-CV 5,300 Kcal/kg GAR coal (TM 21.32%, sulphur 0.75%, ash 6.04%), was decided at $82.66/t for the first period of March, compared with February’s $82.26/t, a 0.5% rise.
In parallel, low-CV HBA-II and HBA-III prices, gauging 4,100 kcal/kg GAR (TM 35.73%, sulphur 0.23%, ash 3.9%) and 3,400 kcal/kg GAR (TM 44.3%, sulphur 0.24%, ash 3.88%), were at $50.7/t (up 0.4%) and $34.16/t (down 0.6%), respectively, the ESDM data showed.
For the HBA and derivatives announced on the 1st of the month, 70% of the value is based on trading prices collected between the fourth week of the previous two months and the first week of the previous month, while the remaining 30% draws from data spanning the second week to the third week of the previous two months, according to the ESDM’s new calculating method.
In contrast, the HBA released on the 15th assigns 70% weight to indices covering the second to third weeks of the previous month and 30% to data from the fourth week of the previous two months to the first week of the previous month.
The ESDM mandates Indonesian coal exporters to use the HBA and derivatives to price transactions. Currently, exporters generally use the Indonesia Coal Index (ICI) – collectively produced by Indonesian NGO PT Coalindo Energy and industry agency Argus, and updated on Fridays – for transactions, Mysteel Global has learnt.
In practice, export cargoes are settled by using another index called Harga Patokan Batubara (HPB) as the floor price, whereas HBA is a key parameter. For example, for cargoes with a CV between 4,100 kcal/kg and 5,300 kcal/kg GAR, the floor price is calculated based on the following formula:
HPB = (HBA-II*K/4100*(100-TM)/(100-35.73)-((TS-0.23)*4+(ASH-3.90)*0.4)), where K refers to the coal’s CV, TM refers to total moisture, TS total sulphur, and ASH ash content.
Based on the formula, Indonesia’s widely-traded 4,200 kcal/kg GAR is priced at $51.8/t, while the ICI index was set at $49.4/t as of last Friday, suggesting cargoes are higher priced based on the new pricing mechanism.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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