Indonesian Coal Market Turn Bearish over Dwindling Chinese Demand

Indonesian coal prices have started showing signs of softening, with a decrease in demand from China.

Offer for Indonesian 4200 GAR coal had slightly come down to USD 47.5/MT, FoB Kalimantan against bids at USD 46/MT. Market participants are expecting the prices to go further down from this levels.

Offers for 3800 GAR coal were heard at USD 38-39/MT, FoB Kalimantan.

An escalated demand for power generation in summer season had witnessed Chinese coal imports rising by 18% Y-o-Y in Jun’18. However, the burden on country’s thermal power generation has been lowered with the relatively good performance of hydro power generation, which has affected buying sentiments in the country.

Of late, subdued coal production in Indonesia had resulted in imbalance in supply and demand, which was supporting the coal prices. However, the decline in Chinese domestic coal price had exerted more downward pressure on Indonesian coal prices this week.

Coal price of Chinese 5500 NAR coal at northern port have dropped to Yuan 660/MT, FoB. Adding to the domestic markets’ bearishness, China’s largest coal miner Shenhua has also lowered its offer price for Jul shipments to Yuan 648/MT, FoB.

Indian Market Scenario:
Indian power producers have remained quiet over Indonesian coal buying, but the low stock position at plants is likely to bring in more demand among the buyers.

As per the data provided by Coal Ministry of India, combined coal stock at the power plants had slightly improved on the month to 20 MnT in Jun’18, but was still 10% lower on the year compared with 22.661 MnT in Jun’17.

Traders engaged in ‘stock and sale’ at ports were also not seemed in a hurry to procure their vessel as they were waiting for further correction in Indonesian coal prices. A coal trader based at west coast had informed that he had booked a corgo of Indonesian 5000 GAR coal at USD 67/MT on FoB basis, only because he was running out of stock.

Landed coast of 4200 GAR Indonesian coal was assessed at USD 59-60/MT, CFR for supramax vessel. While 3800 GAR coal was priced at USD 49-50/MT, on CFR basis.