Indonesian thermal coal prices, which have been rising for over the last two months amid surging demand from China, continued to show a noticeable upward movement this week as well.
The popular 4,200 GAR index price rose by $4.3 week-on-week (w-o-w) to $55.98/tonne (t), while the 5,000 GAR grade moved up by $5.6/t w-o-w to $79.6/t, FoB.
Chinese buying interest continues on increased summer demand
Strong Chinese demand for Indonesian coal continued to lift prices this week as sky-high domestic coal prices prompted Chinese buyers to switch to imported coal.
The most-traded thermal coal futures contract, for September delivery, CZCcv1, on the Zhengzhou Commodities Exchange, ended at a historical high of 925.4 yuan/t ($143.66/t) last week.
There is increased power consumption in China this year due to high summer temperatures and subsequent rise in air-conditioning demand. While China used to meet most of its thermal coal requirement from Australia till last year, the unofficial ban on the same has made the country turn towards Indonesia, Russia, and South Africa, which is impacting the prices.
China’s Electricity Council has forecast a 6-7% y-o-y increase in the country’s electricity consumption for 2021 citing expectations of stronger domestic activity and overseas demand post Covid-19. The same may also exceed 8% if high summer temperature affects most part of the country for prolonged periods.
Demand remains subdued in India amid rising Covid cases
Amid the alarming rise in Covid cases in India, several plants across sectors, including power, textile, chemical and cement, are working under minimum load, thereby reducing their import requirement of Indonesian thermal coal. The sharp rise in the material’s prices over the last one month has also made several users switch to domestic coal.
Though monsoon procurement was largely expected to peak during this time of the year (pre-monsoon stocking), trading activity has remained under pressure due to rising Covid-led restrictions.
Portside prices for Indonesian thermal coal averaged at INR 5,150/t ex-Kandla for 4,200 GAR and INR 6,400/t for 5,000 GAR ex-Kandla.
According to some market sources, the escalated freight rates, along with the lower availability of vessels willing to come to India amid Covid restrictions and Force Maejure at ports have impacted the stock availability of Indonesian coal at the Indian ports as well as the portside prices.
CoalMint’s vessel line-up data reveals that about 1.49 million tonnes (mn t) of Indonesian thermal coal would be arriving at Indian ports between 15-25, May’21 with the highest volume coming at Mundra Port followed by Navlakhi Port.
What lies ahead?
China is likely to continue buying till June-July as power utilities would seek replenishment of the coal stocks. Indonesian thermal coal demand and prices are likely to increase further in the coming weeks amid no expectation of improvement in China’s domestic coal production due to the ongoing safety checks at mines.
Indian portside prices, on the other hand, would continue to witness elevate levels amid lower stock availability . Rising Covid cases in the country may further keep procurement demand in check.
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