The Indonesian Coal Index (ICI) remained in a tight range last week amid lower trading activity as traders delayed any major coal procurement in the run-up to the Christmas and New Year holidays.
Chinese importers have adopted a wait-and-watch mode and are avoiding making any major purchases ahead of the New Year, and the Winter Olympics in Feb’22.
Power demand from the manufacturing sector has slowed down sharply ahead of the holidays. Moreover, rising coal production in China since the past few months has also continued to keep domestic prices under pressure, thereby dissuading traders from purchasing imported coal.
Coal production of the top 10 enterprises rose to 1.98 billion tonnes (bn t) during Jan-Nov’21, up 6% y-o-y, data from China’s National Coal Association showed. Meanwhile, the most active Zhengzhou thermal coal futures contract for Jan’22 delivery were traded at RMB 689.2/t as on 27 Dec’21, as against RMB 744/t last week, indicating the drop in domestic prices.
Indonesia’s tight coal supply is supporting prices
Despite the weak buying appetite, tight supply conditions (especially of the 6500 GAR) in Indonesia — due to rains and domestic market obligations (DMO) — continue to support prices, compelling miners to hold offers in anticipation of further price rises in January.
Indonesian coal output in CY’21 was assessed at 560 mn t as on 10 Dec’21, indicating that miners have already missed their target of 625 mn t for the calendar.
Also, Indonesia’s Ministry of Energy and Mineral Resources has asked miners to make up for the shortfall of 3.1 mn t in December deliveries to state-owned power utility Perusahaan Listrik Negara, which would lead to further supply crunch in Jan’22.
Indian demand remains tepid
Indian importers continued to remain on the sidelines amid limited end-user demand and uncertainty over the price trajectory in the upcoming week.
“It becomes difficult to take a stand on prices when Chinese buyers are out of the market. There is uncertainty. No major vessels are lined up since trading activity is very weak,” said a north India-based trader.
Coal stocks at Indian power plants stand at 23.2 mn t, sufficient for 11 days as against 21.7 mn t last week.
Improving coal supply at power plants and slowdown in manufacturing activity have kept portside prices unchanged for 4200 GAR at INR 7,200/t (t) ex-Kandla and 5000 GAR at INR 9,500/t. Prices exclude cess and GST.
Short-term outlook
Indonesian thermal coal prices would possibly rise in January amid supply tightness and also because trading activities resume post-New Year holidays globally, including in China, before the country recedes for the week-long Lunar New Year Holidays from early Feb’22.
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