Indonesian coal market showed further signs of softening despite an uptick in demand from India, as the Coal industry in Indonesia is facing a supply overhang in line with limited Chinese demand.
The steep decline in coal prices indicate that some of the grades are now at their lowest level for the year, drawing attention from the buyers in the process. But, the long absence in demand from China has been cited as the major reason behind the downtrend in Indonesian coal prices.
Indonesian 4200 GAR coal was offered at USD 40/MT, FoB Kalimantan, against bids at USD 38-38.5/MT. 3800 GAR coal price was assessed at USD 34/MT on FoB basis.
The drastic fall in coal prices has certainly drawn attention of the Indian buyers, which has resulted in an increase in trade, but done little so far to stop the decline in Indonesian coal prices, commented an Indian trader.
Indonesian 5800 GAR coal price have reached USD 76-77/MT, FoB Kalimantan which had attained highs of USD 81-82/MT in Jun’18. Similarly, 5000 GAR coal has also seen a drastic fall of around USD 10-11/MT from month-ago price to USD 58/MT this week.
Outlook of Indonesian coal for Indian buyers remains clear that they would actively seek cargoes after the commencement of monsoon season; also the re-opening of ports which were forced to close in monsoons would aid in the growing import demand for the country.
Besides, the extended stay of South African coal at high levels would also divert Indian captive power, cement and chemical industries to meet their requirements from Indonesian coal market, in a period when CIL would struggle to keep hold of the rising demand.
However, the demand outlook for China is less clear; as most of the country’s utilities remain well stocked after the record imports in Jul’18 and the peak summer demand having also ended.
Market participants have highlighted that the government policies in China also remains a reason behind the subdued demand. The Chinese government is yet to specify the exact quota of stock to be maintained at the power plants, thereby limiting imports from the utilities.
Indonesian coal is nevertheless set for a rebound in coal prices from Sep’18 onward, finding cue from the rise in demand from India and it wouldn’t be long before China resumes its coal purchasing too.
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