Indonesian low CV coal market remained firm this week following increased sales to state owned power utility-PLN and some short covering from China.
The incoming presidential elections in 2019 are certainly changing the coal supply dynamics in Indonesia, as the government had already cleared its view by keeping the DMO unchanged for the current year.
Under the Domestic Mining Obligation (DMO), the coal miners are told to allocate 25% of their annual coal output for sales in domestic market. Besides, the government had also decided to keep the price cap on coal, so as to ease the burden on PLN as the utility is not allowed to increase the electricity tariff until 2019.
However, the step to boost procurement for PLN has now started to take its toll on Indonesian miners as few of them are reported to have running out of cargoes for exports. Coal producers which had not yet met their obligations for the year end have now started to sell coal domestically to avoid penalties.
Market participants have informed that the 4200 GAR coal market had witness mild recovery due to the tightness in supply arising from miners DMO deadline, but the short term strength in pricing was largely supported by the Chinese buying.
Indonesian 4200 GAR coal price remained almost altered at USD 38-39/MT levels, FoB Kalimantan. Also, not much change was seen in 3800 GAR coal price which was assessed at USD 31-32/MT on FoB basis.
The direction of mid and high CV market, however, still remain unclear as both have posted noticeable fall in prices over the week. Coal Index for 5000 GAR dropped by USD 1.19/MT to USD 54.69/MT, while index for 5800 GAR coal fell by USD 0.63/MT to USD 71.33/MT this week.
Offers for 5000 GAR coal were assessed at USD 66-67/MT, CFR for Indian buyers.
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