Indonesian coal prices surged to record-levels last week as the mid to high CV grades rose by $7-8/tonne (t) amid cargo scarcity and bullish thermal coal demand.
Owing to reduced coal output due to heavy rains and miners cancelling deliveries, a robust demand for thermal coal has emerged, compelling traders who are able to export to conclude deals at a premium of $1-5/t above the index price in India.
“Several miners in the country have declared Force Majeure and have been revisiting their sales targets for the Oct- Dec’21 quarter due to the massive crunch in cargo in the country,” said a reputed Indonesian miner.
As per market reports, the current situation is likely to disrupt 4-5 mn t of monthly coal output, mainly from the South Kalimantan region. The heavy rainfall in the country is largely seen as a precursor to the upcoming monsoon season in this South East Asian nation which may keep supply tight, and leave no room for a price correction.
Indonesian thermal coal index prices
| Grade | Sept’21 W2 | Sept’21 W3 | w-o-w change |
| 3400 GAR | 45.72 | 47.67 | 1.95 |
| 4200 GAR | 76.68 | 81.40 | 4.72 |
| 5000 GAR | 110.12 | 117.24 | 7.12 |
| 5800 GAR | 127.97 | 135.13 | 7.16 |
| 6500 GAR | 139.68 | 148.07 | 8.39 |
Prices in $/t
Strong Chinese demand supports Indonesian coal prices
Amid a strong coal restocking demand in China ahead of winter, and a sharp rise in domestic coal prices due to supply constraints within the country, Chinese utilities have been buying Indonesian coal, supporting its higher prices.
Despite the supply boosting efforts made by the National Development and Reform Commission of allowing several open cast mines to meet the supply deficit, market participants remain uncertain if this could fill the supply gap.
As on 16 Sept’21, coal stockpiles at Qinhuangdao Port moved down by 30,000 tonne to 3.82 mn t.
The Chinese domestic thermal coal offers for 5,500 NAR have moved higher by RMB 200/t ($31/t) w-o-w to 1,400/t ($216/t).
Given that the country witnessed several blackout in winter last year and even during summer this year due to floods and critical stock level at plants, coal procurement is likely to remain high in the upcoming weeks.
Indian buyers procure at premium
Owing to an acute domestic supply crunch in India, few importers resorted to booking cargo currently at premiums. However, availability remained a major issue.
“Coal availability is extremely tight currently from Indonesia as the premiums are going way higher. Indian importers are more interested in low CV coal but limited deals are going through,” said an Indore-based importer.
Majority of Indian importers kept to the sidelines on unviability of buying coal at such higher prices. Instead, few importers also resorted to booking Australian coal reloaded from China for its comparatively cheaper prices.
Meanwhile, coal inventory at power plants continue to remain lower, keeping the coal supply situation at a ‘super critical’ level. As on 17 Sept’21, coal stocks were at 10.73 mn t (sufficient for only 6 days of use) compared to 11.08 mn t assessed on 9 Sept’21.
Amidst low availability, portside offers of 4,200 GAR coal in Kandla were at INR 7,300/t, while offers for 5,000 GAR in Kandla were at INR 8,600/t, in case of advance payments (prices exclude cess and GST).
Outlook
CoalMint believes, Indonesian coal prices are likely to remain elevated in the near-term amid slowdown in output and lower cargo availability which may compel Indonesian producers to delay deliveries.
A sharp rise in Chinese domestic thermal coal prices prompting traders to look for overseas coal is also likely to support Indonesian coal prices.
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