Indonesian coal prices that had touched new lows this year amid reduced energy demand, have started moving up since the last two weeks.
At the start of this week, 4200 GAR Indonesian thermal coal prices have moved up by $1.56/t and is currently assessed at $25.1/t, FoB basis.
Market participants are attributing this uptrend to the increased inquires for Indonesian coal from China.
China: Upcoming quotas and restricted domestic coal supplies
The domestic supplies of coal in China has tightened since mid-September amid safety checks in local coal mines in Shanxi which is country’s biggest coal-producing province. Apart from this, the province has also been tightening its sales permit over the last few days.
“As the year is coming to end and new import quotas are set to come into effect from January 2021, and the Chinese buyers have started showing interest in making coal purchases for end-November and December shipments”, remarked a trader based in China.
Apart from this, market participants are anticipating that China is likely to face shortage for domestic coal in the coming winter season.
On Sunday a severe coal accident happened due to excessive level of carbon monoxide in the mine in Chongqing province of Sichuan province. This would encourage authorities to step up safety inspections curtailing coal supplies.
Moreover, scheduled maintenance work on the major coal-transporting Daqin railway from 7-31 October is expected to aggravate the supply shortfall by limiting coal deliveries to Qinhuangdao.
Indian market sentiment
In the Indian market, buyers from chemical, textiles and power sectors based in coastal belt are steadily increasing their Indonesian coal purchases amid expected positive demand in the last quarter of 2020.
While the imported offer for 4200 GAR grade coal to India is assessed at around $34.5-35/t, CFR Kandla, the domestic offers ex-Kandla port for 4200 GAR is at around INR 3,050/t and that of 5700 GAR at INR 4,550/t.
Short-term outlook
According to the industry participants, amid firming demand for thermal coal from China and India, Indonesian coal prices are likely to move up in upcoming weeks.
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