Indonesian coal prices continued to rise this week amid strong demand from China and South Korea as state utilities resorted to replenishing their stockpiles on account of high daily power consumption. Tight domestic supplies within Indonesia, amid reduced manpower due to the rising Covid-19 cases, further supported its prices.
Indonesian thermal coal prices
| Grade | Aug’21 W1 | Aug’21 W2 | w-o-w change |
| 3400 GAR | 40.21 | 41.36 | +1.15 |
| 4200 GAR | 69.53 | 71.45 | +1.92 |
| 5000 GAR | 100.30 | 105.72 | +5.42 |
| 5800 GAR | 115.55 | 118.53 | +2.98 |
| 6500 GAR | 125.15 | 126.81 | +1.66 |
*Price in $/t
Demand from Chinese, South Korean utilities rise
After assessing the market scenario over the last few weeks, Chinese traders rushed in to procure Indonesian coal as several power plants in Huaneng, Fujian and Jiangsu floated a slew of buy tenders for September. Most of the tenders were for 3,800 GAR to 5,500 GAR grades. Amid summer procurements, buyers were heard to be booking coal for September too as winter storage demand is coming up soon.
However, the rising prices of cargo amid lower availability posed a major concern in terms of deliveries because Supramax and Panamax vessels are trading at multi-year highs.
South Korean utilities were also heard to be scouting for Indonesian coal amid rise of $10/t w-o-w for high-calorific value (CV) Australian coal at $170/t, FoB Newcastle basis. The country is facing more-than-usual hot summers and high-gas prices are goading the utilities to opt for coal, a comparatively cheaper fuel.
Indonesia is the second-highest exporter of thermal coal to South Korea, exporting 10.5 mn t to the country over Jan-Jul’21, while the country’s total coal imports stood at 55 mn t during the said period.
Supply constraints from Indonesia
Coal supply from Indonesia continues to remain under pressure as the Indonesian Ministry of Energy and Mineral Resources (ESDM) has imposed sanctions on coal exports of 32 companies after they failed to fulfill their domestic market obligation wherein miners were required to sell 25% of their total planned output domestically.
However, given the higher preference for low-CV coal by Indonesian power utility Perusahaan Listrik Negara (PLN), traders ruled out a long-term impact on the rising trajectory of Indonesian coal prices, a Indonesia-based trader said.
Meanwhile, slowdown in coal output at some mines in Kalimantan owing to the rising Covid-19 cases continued to keep supply tight as most miners were mostly sold out for this month, he added.
Indian buyers reluctant to buy at higher prices
Despite rise in enquiries for Indonesian coal booking post-monsoon, Indian buyers refrained from placing any constructive bids last week due to uncertainty over end-users accepting higher prices back home.
According to market participants, major coal consuming companies continue to rely on domestic coal blending and have reduced their capacity utilisation to minimise losses on books.
Indian importers largely kept to the sidelines as miners charged $2-3/t premium over high-priced Indonesian coal amid tight supply in the country.
Stock availability of the 4,200 GAR remains sharply under pressure in Kandla as the limited quantity of old stock available is being offered at INR 6,800/t.
Portside offers for 5,000 GAR in Kandla rose INR 100/t w-o-w to INR 7,900/t, in case of advance payments (prices exclude cess and GST), up 13% m-o-m.
Short-term outlook
CoalMint believes, Indonesian coal prices are likely to remain elevated in the near term amid tight supply conditions in the country.
Further, since the strong demand from Chinese power utilities also comes in at the early stages of the country’s winter procurement–that typically begins September onwards– traders also rule out prospects of correction in Indonesian coal prices in the near-term.
However, any significant rise in prices also looks unlikely as these are already at an all-time high.
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