The Indonesian Coal Index (ICI) for all grades rose sharply last week amid robust coal demand in China and lower availability of cargoes from Indonesia.
Constrained global supply of high CV coal also lifted the Indonesian 6,500 GAR grade price to $119.3/t, FoB, up 12.4% m-o-m.
Indonesian coal prices
| Grade | Jul’21 W2 | Jul’21 W3 | w-o-w change |
| 3400 GAR | 37.05 | 38.49 | +1.44 |
| 4200 GAR | 64.92 | 67.90 | +2.98 |
| 5000 GAR | 93.73 | 96.75 | +3.02 |
| 5800 GAR | 105.59 | 107.35 | +1.76 |
| 6500 GAR | 116.11 | 119.26 | +3.15 |
*Price in $/t
What is driving up Chinese demand for Indonesian coal?
Amid depleting coal stocks at power plants and severe floods in a few provinces, demand for thermal coal witnessed a sharp rise last week as buyers rushed to book imported coal cargoes.
Thermal coal stock at Qinhuangdao Port, a major coal transfer hub in northern China, fell by 5% w-o-w to 3.57 mn t towards the end of last week.
On the other hand, heavy floods in the country have disrupted mining operations at the major coal producing province of Henan. Transport of coal from Zhengzhou (Henan’s capital) and other top mining regions like Inner Mongolia and Shanxi, to central and eastern China has also been severely impacted.
Adding to the woes, several small and mid-sized coal mines in Shaanxi province had suspended production following a coal-mine accident in mid-July.
“Demand from Chinese utilities and power plants for Indonesian coal currently remains the strongest and is mainly for the low-mid CV (3,400-5,500 NAR) category. However, lower availability of cargoes until at least the next month is pushing the prices higher,” an Indonesia-based trader said.
On the supply side, production at several mines in Kalimantan is heard to have slowed down due to rising Covid-19 cases there and limited work force, while cargo availability also remained lower.
Indonesian coal output in the first six months of the year reached 286 mn t, Indonesian energy ministry data showed. The Jan-Jun’21 coal output equated only 47% of its annual target of 625 mn t as adverse weather conditions since the beginning of this year decelerated coal production from the country’s key mining regions.
Indian importers evaluating market dynamics
The rising trajectory of Indonesian coal prices and expectations of a pick-up in demand after the monsoon have prompted several Indian importers to look for cargoes during late Aug and Sept, informed market participants.
However, reduced end-user demand amid increased raw material costs are also preventing importers from making any major bookings.
Demand for domestic coal continued to remain high as many coal-consuming industries in India have shifted to coal blending. However, steel, textile, paper, and sugar units located in the southern and western belts, and a few in the central region continued to procure low-CV imported coal in smaller quantities.
According to market participants, stock of 4,200 GAR in Kandla is quite limited while portside offers for the same in nearby Navlakhi Port are at INR 7,000/t. Portside offers for 5,000 GAR in Kandla have risen to INR 7,700/t, up 19% m-o-m in case of advance payments (prices exclude cess and GST).
Short-term outlook
CoalMint believes, Indonesian coal prices are likely to remain elevated in the near-term amid robust procurements from China.
Though miners in Indonesia have ramped up output over the last few months to meet China’s demand, rising Covid-19 cases continue to disrupt operations there.
Portside offers in India are also likely to remain elevated in the face of depleting stocks and lower cargo arrivals amid rising prices.
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