Indonesian Coal Prices Rise Further Amid Uncertain Outlook

Indonesian coal production has been affected by heavy rainfall since last two months, which had forced miners to complete their Jun’17 backlog in Jul’17 and Jul’17 backlogs in Aug’17. Now that the weather condition is improving, miners are hoping to restore normal production.

However, owing to rising Newcastle Coal index, Indonesian coal prices have increased further this week.

Spot Offers for 5000 GAR coal was accessed at USD 60/MT, FoB Kalimantan. While offers for 4200 GAR coal was heard at USD 43/MT, FoB Kalimantan and offers for 3800 GAR coal was heard at USD 37/MT this week.

Of late, Indonesian coal prices have been affected by the changing Chinese coal policy. Chinese Government had urged domestic miners to boost production in a bid to reduce coal imports and also to lower domestic coal prices.

However, Production was affected due to short term supply issues such as increased safety inspection has led to suspension of coal mines both in Inner Mongolia and Shaanxi, which which encouraged buyers to import coal.

Coal imports were expected to decline owing to the coal ban imposed by Chinese Government at small ports, however due to strong demand in summer season, buyer are opting to import their coal at large ports, despite long waiting time at ports and eventually resulting in higher expenses.

Also, Market participants have informed that of the ports being banned for imports, only 2-3 ports were handling major coal imports and most of the ports were for low CV coal, which has low demand in China.

While China continued to buy mid-CV coal, low CV was purchased by India. Current offer for low-CV 3800 GAR coal was heard at USD 44-45/MT, CFR India.

Thermal Coal Imports in China have also been boosted by weaker than expected hydro power generation, as heavy rainfall in Southern China during early Jul’17 had forced hydro power plants to close up to two-third of their capacity to limit damage due to flooding.

Coal prices are expected to come down, once flooding situation is improved, which will thereby increase hydropower generation.