The Indonesian Coal Index (ICI) for all grades rose last week on continued tight supply in the country alongside increased enquiries from China following heavy rains.
Prices for the 5,800 GAR high-calorific value (CV) coal rose by $3.4/tonne (t) to $105.6/t, while those of the 6,500 GAR increased by $3/t w-o-w to $116.1/t, FoB. Prices for the 4,200 GAR were up by $1.3/t w-o-w to $65/t, FoB, while the same for the 5,000 GAR were at $94/t FoB, up by $4/t w-o-w.
Floods dampen production in China
Heavy rains in several parts of China have flooded the coal mines, hampering production. A few coal mines in north-western China’s Shaanxi province reported to have suspended production due to heavy water inrush while coal output at most of the mines have turned limited as a preventive measure, informed market participants.
Henan province in central China announced suspension of thermal coal shipments outside the province, after two railways that deliver the material into the province were disrupted by rainstorm, affecting electricity supply.
Adding to the woes are the reduced stocks at Qinhuangdao Port, a major coal transfer hub in northern Chinar. In the latter half of last week, coal stocks at Chinese ports stood at 3.75 million tonnes (mn t), down by 0.21 mn t w-o-w and 1.32 mn t lower m-o-m and y-o-y.
Meanwhile, on the supply side, the rising number of Covid-19 cases in Indonesia has also slowed down production and delayed shipments there as mid-sized miners continue to remain most affected by the current situation.
However, the large miners were heard to be operating normally against the backdrop of strict measures which include frequent temperature checks, quarantine facilities, and restriction in movement of outsiders in the mining sector to curb the spread of the virus.
Indian importers remain on the sidelines
The steel, textile, and tiles sector continued to procure Indonesian coal in smaller quantities, while demand for domestic coal remained steady.
Most of the coal-consuming units in India, including the smaller and larger firms, have shifted to blending of domestic and Indonesian coal.
Owing to the current rise in Indonesian coal prices, Indian importers continued to remain on the sidelines and await a correction in prices before making any major booking for the upcoming months. Lower number of cargo availability in Indonesia, and the ongoing monsoon season also deferred importers from making any major booking, informed market participants.
Portside offers of 4,200 GAR and 5,000 GAR coals remained largely unchanged at INR 5,850/t, up 11% m-o-m, and INR 7,000/t, up 8% m-o-m, ex-Kandla, respectively in case of advance payments (prices exclude cess and GST).
The current freight for Supramax vessels between Indonesia and India remained firm at $27/t.
Short-term outlook
CoalMint believes, Indonesian coal prices are likely to remain elevated in the short-run amid adverse weather condition in China and supply concerns in Indonesia. However, Beijing has decided to distribute more than 10 million tonnes of coal from its reserves to guarantee supply across the peak summer season, as the country has reserve facilities with a storage capacity of 100 million tonnes, that can be arranged by the government.
The major reserve bases are mainly located in coal production, distribution and consumption centres, major railway transportation nodes and ports. This could ease the supply issues there in a few weeks’ time.
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