Supply crunch eases in South and East Kalimantan, but Sumatra still faces logistics issues in Indonesia
Indian demand subdued amid sufficient stocks
Indonesian thermal coal prices dropped towards last weekend. Prices of low-CV (3400 GAR) coal decreased by $0.27/tonnes (t), reaching $34.96/t, while high-CV (5800 GAR) coal fell by $1.06/t, settling at $94.02/t.
On the supply side in Indonesia, the supply crunch has eased in South and East Kalimantan, while Sumatra continues to some face logistics issues. Consequently, many spot vessels have become stranded at the ports, awaiting loading, which has kept the supply tight in the Sumatra region. The prolonged rainy season is preventing improvements in the hauling process at the mines, leading to a slowdown in operations, especially in the Sumatra region.
China’s domestic coal prices continue to follow downward trend, reflecting extremely low coal consumption in the country at present. Downtrend in Chinese domestic prices, failed to boost seaborne coal demand as top consuming nations maintained sufficient stockpiles. China is accumulating coal from all origins at their ports and offering significant discounts to redirect it to other destinations. Chinese traders are attempting to divert cargoes, originally destined for end-users in China, to different markets as the latter hold ample stocks.
On the Indian demand side, demand remained low at the seaborne market on the back of an increasing level of domestic coal stocks. The current demand from India was subdued amid plenty of existing stocks and increase domestic production. Demand from India largely remained low, with only a few power plants occasionally purchasing Indonesian mid-CV coal. Seaborne coal demand is also weak, as most buyers have adopted a wait-and-watch approach amid market volatility.
India: Portside prices remained stable
The thermal coal prices of 4200 GAR coal at Kandla Port have dropped to INR 6,300/tonnes. This stability in prices can be attributed to subdued demand.
Outlook
Indonesian coal prices may experience an uptick in the upcoming weeks, driven by the anticipated surge in demand from India, expected towards the end of March 2024, particularly from power plants gearing up for the full onset of summer. Moreover, demand from the cement sector might rise post-election due to increased infrastructure projects. However, the continuous decline in China’s domestic coal market is impacting demand for Indonesian thermal coal and prices.