The Indonesian Coal Index (ICI) for mid-CV 4,200 GAR grade coal eased marginally for the second week in a row as traders harboured expectations of a price correction following rising domestic supplies in China. However, any sharp fall was limited as rising Covid-19 cases in Indonesia have led to manpower issues, and delay in shipments from the country.
The price for the 4,200 GAR grade fell by $0.4/t w-o-w to $64/t, FoB, while the 5,000 GAR was at $90/t FoB, up by $0.6/t w-o-w.
Prices for the high-CV Indonesian coal, however, continued to rise. The 6,500 GAR rose by $1.4/t w-o-w to $113.4/t, FoB, on the back of reduced supply of higher-grade coals globally.
Increase in Indonesia’s Covid cases
Indonesia’s biggest coal-producing province of East Kalimantan has recorded a spike in Covid-19 cases as miners started getting infected, further slowing the pace of production.
Though major mining companies such as PT Bumi Resources, and PT Bayan Resources continued to report normal operations so far, several small miners were heard to be majorly impacted by the rising cases in the region.
“The rise in Covid cases has resulted in reduced manpower both at mines and ports. Traders had expected production to get back to normal this month after the heavy rains and cargo availability to also improve. However, there are hardly any (cargo) for July. Most miners have cargoes to offer from August onwards,” an Indonesian-based trader said.
According to market participants, the current supply tightness in Indonesia is likely to support the prices, even as enquiries from China have eased slightly due to expectation of a price correction. Amid improving domestic coal production in China, traders, over the last two weeks, had kept to the sidelines to assess the trajectory of prices.
However, enquiries for low-CV Indonesian coal continued to surface from major importers last week, informed market participants.
Lukewarm Indian demand
Despite the increasing usage of domestic coal, few end-users continued to procure Indonesian coal in smaller quantities.
Demand for relatively cheap low-CV coal remains steady in the country as most industries, such as power, tiles, and paper, have resorted more to blending of domestic and Indonesian coals.
“Plants are running on substitutes such as domestic and wood coal to save on costing. The power industry has also started buying low-CV coal as electricity prices are constant for long-term contracts,” a Surat-based trader said.
Amid the rising Indonesian coal prices, few major power companies were also heard to be procuring more of Australian coal and also had increased their usage of domestic coal, informed market participants.
Portside offers of 4,200 GAR and 5,000 GAR coals were 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).
Major Indian importers are heard to be looking for bookings in late August and September due to the lower number of cargo available in July. The current freight for Supramax vessels between Indonesia and India remained firm at $27/t.
Short-term outlook
CoalMint believes that the concerns surrounding the rising Covid-19 curve in Indonesia, are likely to support its coal prices. However, demand from China might ease slightly due to improving production capacity in the country and the government’s effort to bring down the coal prices.
China’s National Development and Reform Commission last week summoned a meeting to expedite construction of coal mining infrastructure in the country. China’s top coal provinces have planned to increase their reserve capacity by the end of CY’21.
Leave a Reply