Indonesian high-CV thermal coal prices rose last week. Prices for high-CV (5800 GAR) coal increased by $1.36/t, settling at $91.16/t. Indonesian mid-CV coal prices (4200 GAR) dropped by $0.13/t to $54.63/t, while prices for low-CV coal prices increased by $0.17/t to $34.56/t.
On the supply side, Indonesian thermal coal supply eased due to the end of the rainy season. While last week’s available cargoes were limited due to miners having had sold most of their material under long-term contracts, demand from the seaborne market was subdued. So, Indonesian miners were mostly focusing on fulfilling domestic demand.
Rising demand from the domestic nickel smelters is also forcing producers to shift their focus. Some Indonesian producers are also attempting to liquidate cargoes, particularly those with a mid-level calorific value, at prices favourable to buyers because they anticipate further price drops in the coming months.
Demand from China remained subdued last week as enquiries from Chinese buyers stopped due to persistent heavy rains in southern China. The impact of rain is likely to persist until the end of next month. Heavy rains in China are expected to further stimulate hydroelectricity generation, which might weigh on spot thermal coal demand in the upcoming days.
Chinese domestic prices have started to fall again, leading to limited demand for Indonesian coal. Moreover, a few Chinese buyers who are enquiring in the market are quoting much lower bids than sellers’ expectations, limiting any firm deals from happening on a fixed-price basis.
In India, the power plants are operating well above the normative stock requirement, which would affect the demand for Indonesian thermal coal. There have been some enquiries from Indian traders for mid-calorific value coal, as this is the only time India stocks up before the rainy season. However, due to volatility in prices, Indian buyers are in a wait-and-watch mode.
Outlook
Indonesian thermal coal prices are expected to witness an uptick in the coming weeks. Demand from India is expected to rise due to increasing requirements from power plants to meet summer electricity demand, while India will also begin restocking for the upcoming rainy season.
However, demand from China will remain subdued as sudden rains in southern China have affected demand for Indonesian coal, compounded by decreasing domestic coal prices in China. The Indian government has extended the mandate for imported coal-based power plants to operate at full capacity until 15 October, 2024, in anticipation of high electricity demand during summer and heatwaves. This extension is expected to boost demand from India.