Indonesian Ministry of Energy and Mineral Resources (ESDM) has set its Jul’17 coal reference price also known as Harga Batubara Acuan (HBA), at USD 78.95/MT.
HBA reference price for Jul’17 increased 4.62% M-o-M compared with USD 75.46/MT set for Jun’17. Reference price was also 49% higher than the value set during Jul’16, on USD 53/MT.
The reference price would be valid for direct selling (spot) from 1 Jul’17 to 31 Jul’17, based on Free on Board (FoB) Vessel basis.
The HBA is a monthly average price based 25% on the Platts Kalimantan 5900 GAR assessment; 25% on the Argus-Indonesia Coal Index 1 (6500 GAR); 25% on the Newcastle Export Index — formerly the Barlow-Jonker index (6322 GAR) of Energy Publishing — and 25% on the globalCOAL Newcastle (6000 NAR) index.
An increase or decrease in these four coal indices will cause an increase or decrease in Indonesian coal price reference every month.
HBA becomes the benchmark of coal price on 6322 GAR coal equivalents with 8% moisture content, 0.8% sulphur content as received basis (ARB) and ash content of 15% (ARB).
Based on subsequent HBA, the coal benchmark price (HPB) is affected by coal quality: coal calorific value, water content, sulphur content, and ash content according to the main trademark of coal or brand called HPB Marker.
The government declares the price marker (HPB) for 8 brands of Indonesia’s coal, which are most commonly traded in the market. These eight brands act as the benchmark and are used to calculate prices of other 67 coal types with a quality similar to the coal price markers.
Reason for the Hike in Coal Prices:
The Ministry of Energy and Mineral Resources has informed that the rise in coal price was driven by the decrease of coal circulation from Indonesia in the world market due to the high rainfall in the large coal producing regions of East Kalimantan and South Kalimantan.
Another reason that affected Indonesia’s coal production was the decline in mining activities, due to Ramadan and Eid holidays until early July.
Indonesian coal prices have not changed much this week owing to Chinese Government’s decision to ban coal imports at small ports.
Indonesian Coal index (ICI1, 6500 GAR) fell by USD 0.69/MT on the week, and was assessed at USD 80.96/MT this week.
Spot offers for 5000 GAR coal was heard at USD 63-64/MT, CFR India, while offers for 4200 GAR coal were assessed at USD 49/MT, CFR India.
Significance of HBA:
The government of Indonesia started publishing a monthly coal price reference since Feb’09 to be used by coal producers for all spot and term contracts.
However, the official implementation of HBA was commenced since Sep’11 and according to government regulation, the coal benchmark price must be used by the holders of production operation, special production operation, as a reference to determine the coal selling price for a particular period.
The declared HBA in this month is valid for the spot price (loading on or before 31 July’17), while as for term price (up to 12 months supply), the average reference price (HPB) of the previous three months would be used to determine the selling price. (Average of 50% of the latest month’s HPB, 30% of one-month prior HPB and 20% of two-month prior HPB).
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