Indonesian coal index corrects by $90/t in 3 weeks on Chinese demand slowdown

The Indonesian Coal Index (ICI), that had been rallying since Jun’21, started showing a downtrend from October-end. In the last three weeks, it has corrected by $28-90/t across grades.

This fall came against the backdrop of the Chinese government’s intervention to stablise domestic prices and increase coal supplies in the country, which ultimately led to reduced imported demand.

However, despite this correction, any sharp fall in Indonesian coal prices were limited due to supply disruption caused by heavy rains in the mining regions.

“Few Indonesian suppliers having stock are still preferring to offer coal at a premium, or else holding the cargo for Q1CY’22 (Jan-Mar’22),” an Indonesia-based miner said.

On the demand side, despite it being muted from China with bids at lower levels, heavy snowfall in northern China last week once again compelled a few traders to make enquires for Indonesian coal.

The heavy and unexpected snowfall resulted in logistic disruptions in the region and also hampered mining operations to some extent.

Domestic price for China’s 5500 NAR grade coal is stable, assessed at RMB 1,200-1,300/t ($188-204/t) ex-Qinhuangdao basis.

Indian market sentiments

Indian coal supplies to the power sector have increased substantially and the crisis has eased. As on 14 Nov’21, coal inventory with power plants stood at 16.7 million tonnes (mn t) which are sufficient to tide over eight days of usage, as per data from the Central Electricity Authority (CEA).

However, for the non-power sector, domestic coal supplies have not yet resumed to Jul’21 levels when the imported and domestic coal supply scenario was normal.

Very few auctions have been conducted under spot and exclusive schemes for the non-power sector so far.

On the demand side, majority of coal-consuming units were heard to have accumulated sufficient stock and preferred procuring imported coal at miniscule quantities.

Indian importers are also waiting for further price correction in the international market before making any major bookings. As per CoalMint’s vessel line-up data, 0.39 mn t of Indonesian coal are set to arrive between 16-20 Nov’21.

Portside prices of Indonesian 4200 GAR are currently assessed at INR 8,000/t ex-Kandla (down by INR 500/t w-o-w), while prices of 5000 GAR are at INR 11,500/t. Prices exclude cess and GST.

Over the last two weeks, old stock of 5000 GAR coal had been sold at INR 10,500/t but market participants informed that now the new stock is being offered at a higher rate of INR 11,500/t.

Outlook

CoalMint believes, imported Indonesian coal prices are likely to remain supported with the ongoing supply tightness that has impacted the small to medium-sized miners in this country. Demand from China may once again rise due to the upcoming  winter.