Indonesian coal prices have increased marginally this week as Chinese buyers have returned back, looking for prompt coal shipments.
Chinese buyers were expecting a further correction in coal prices and thus holding back. However, Coal production in Indonesia has been hampered by bad weather which has kept coal supply tight. Also, the fall in coal stock at Chinese ports and utilities, forced buyers to return back to the market.
Offer for 5000 GAR coal was assessed at USD 62/MT, FoB Kalimantan. Coal prices for 4200 GAR and 3800 GAR were assessed at USD 43-44/MT, FoB Kalimantan and USD 36/MT, FoB Kalimantan.
Indonesian coal prices may increase further in the coming months. As China’s largest coal miner Shensua has suspended production at two of its opencast mines at Inner Mongolia ahead of the peak winter season when coal demand is relatively high.
The company has also reduced current year’s target for coal production by 7% to 278 MnT and coal sales volume by 2.7% to 396 MnT.
The company’s officials expect China’s domestic coal prices to be stable, at around Yuan 550/MT until the end of the year. However, they have anticipated higher demand in certain regions during winter that could create minor volatility.
NDRC new rule for Coal Inventory:
China’s National development and Reform commission (NDRC) has drafted new rule under the government’s inventory system.
The commission has instructed power plants to have coal inventories of 5-10 days above normal levels during summer and winter period. Moreover, when there is shortage in coal supply and prices are rising, power plant can have on hand extra coal for 10-20 days, the commission added further.
The steps by NDRC are aimed at preventing panic buying from power utilities during supply tightness, which add further fuel to the price rallies.
The commission wants to ensure effective implementation of these rules, failing to which the plants could be penalized with measures such as curbing their power output.
Indian Market Scenario:
Indian buyers are expected to replenish their coal stock after the monsoon period. As the declining coal stock at power plants would encourage utilities to import more coal.
India’s power demand has spiked in Jul’17-Aug’17 period and CIL have not been able to regulate coal supply due to flooding.
According to the CEA’s report, the country’s coal stock at power plants has reached 12 MnT as on 28 Aug’17, enough for 8 days of power generation. Also, 10 power plants are reported to have critical/ super critical coal stock of less than 7 days.
Price of 4200 GAR coal is heard at USD 51-52/MT, CFR India, while 3800 GAR coal is quoted at 44-45/MT, CFR India.
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