The Indonesian Coal Index (ICI), declined for the fourth straight week amid weakened demand from China and rising default cases from Chinese and other South East Asian buyers that prompted miners to resell or renegotiate cargoes.
However, a sharp fall was limited due to the prevailing tight supply scenario in Indonesia that continues to affect coal output and limited cargo availability from miners.
| Grade | Nov’21 W2 | Nov’21 W3 | w-o-w change in $/t |
| 3400 GAR | 51.1 | 45.73 | -5 |
| 4200 GAR | 82.7 | 70.70 | -12 |
| 5000 GAR | 118.5 | 106.15 | -12 |
| 5800 GAR | 136.9 | 126.86 | -10 |
| 6500 GAR | 154.9 | 147.55 | -7 |
Despite Chinese power utilities, last week, issuing a few tenders, demand from the country remained weak as they awaited a further reduction in prices.
Several Chinese buyers were heard to have defaulted and deferred on Indonesian shipments as domestic prices declined sharply and as daily coal output in the country was stable at 12 mn t, as per market sources.
Thermal coal futures in China plunged more than 60% to around RMB 800 yuan/t ($125/t) from a historic high of nearly RMB 2,000/t in mid-October.
According to market participants, very cold weather conditions in China this year are likely to raise demand for Indonesian coal in the upcoming week, which prompted some miners to hold cargoes.
As per China’s National Meteorological Department, cold weather is set to hit the country this week, which may last till early December. Heavy snowfall during this period is seen affecting national logistics, thereby leading to reduced coal supply.
Indian market sentiments
Indian importers continued to delay procurement amid anticipation of further fall in FOB rates.
Improving coal supply situation at power plants further compelled them to renegotiate prices as Indonesian miners offered $1-2/t higher premium over the ICI index, a Mumbai-based trader said.
As on 17 Nov’21, coal inventory with power plants stood at 17.2 million tonnes (mn t) which are sufficient to tide over eight days of usage, as per data from the Central Electricity Authority (CEA).
Although portside trading activity regained momentum , bulk deals largely remained limited.
Portside prices of Indonesian 4200 GAR were unchanged at INR 8,000/t ex-Kandla, while prices of the 5000 GAR are at INR 11,000/t. Prices exclude cess and GST.
Outlook
CoalMint believes, imported Indonesian coal prices are likely to remain supported with the ongoing supply tightness in the country. Demand from China may also rise in the coming weeks with falling winter temperatures.
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