The Indonesian Coal Index (ICI) rose further this week as price for the 4,200 GAR grade coal was at $64.82/t, FoB, up $3.9/tonne (t) w-o-w and $10/t m-o-m. The price for 5,000 GAR grade coal was at $90.81/t, FoB, up by $4/t w-o-w and $12/t m-o-m.
The index for the high-calorific value (CV) 6,500 GAR also rose to $111.8/t, FoB.
Demand from China continued to remain strong amid tightening domestic supply and strong utility demand due to the ongoing warm summer days.
On the supply side, few of the thermal coal mines in the country were heard to have been either closed or have reduced production after the authorities stalled their coal production due to safety inspections ahead of China’s Communist Party’s 100th anniversary celebration.
Indian buyers opt for domestic coal
Amid a sharp rise in Indonesian coal prices, Indian coal users were shifting to domestic coal, whose availability has increased and is also a cheaper option against imported coal.
In June’21, CIL and its subsidiaries auctioned about 3 mn t of thermal coal via spot, special forward and exclusive auction schemes.
Imp vs domestic price: In WCL’s (major supplier of domestic coal in Western belt) latest auction held on 18 Jun’21, the average price of G10 grade (4300-4600 NAR) coal averaged at 2,600/t ex- mine basis whereas the portside price of imported Indonesian coal 4200 GAR coal is assessed at INR 5,650/t ex-Kandla port basis (excluding cess and GST). The average difference between domestic and imported coal after adding all the duties and taxes comes around INR 3,050/t.
Stock with utilities: Indian power utilities have thermal coal stock as on 25 Jun’21 of 30.3 mn t which is sufficient to last for 21 days, as per National Power Plant data. However, several large power and cement plants were also heard to have accumulated stock for the on-going monsoon season.
Heavy rains affect portside trading
Amidst heavy rains, trading activities for imported coal at Indian ports continued to remain under pressure as Magdalla Port has closed down operations and traders have shifted their vessels to Bhavnagar, or Kandla. Navlakhi, Dahej and Hazira ports also were heard to be facing disruption in vessel discharge.
Amid tight supply of stock and an increase in index, portside prices for the 4,200 GAR and 5,000 GAR rose further and were assessed at INR 5,650/t and INR 6,500/t ex-Kandla respectively (in case of advance payments).
The current freight for Supramax vessels between Indonesia and India is currently assessed at $27/t which was at $11/t in Jan’21.
Indonesia’s rising Covid-19 concerns
The country has been reporting record-number of daily Covid-19 cases over the last few weeks after authorities identified the presence of highly infectious Delta variant.
Although mining activities have largely remained unimpacted, market experts overview the situation to take a toll on labour health in the mining industry soon as several industries in the country have already brought down operations due to workers falling sick.
This comes amid a strong demand emerging out of China and Indonesian miners ramping up their coal output to meet the fuel demand both domestically and internationally.
As per industry reports, Indonesian utility, PLN has signed an agreement with miners producing 4200-4900 GAR for supplying additional 1 mn t of thermal coal in June and 5 mn t in July. This means that Indonesian miners have to divert their coal to domestic market squeezing coal supplies meant for export market.
What lies ahead?
CoalMint has heard from its market sources that, post 100th year celebration in China, safety inspections would ease out and domestic coal production would improve post 10th July easing out coal supply crunch there.
With this, imported coal demand in China would reduce and its prices would correct in the days following. The only concern is rising COVID cases in Indonesia that would result in lockdowns and restrictions, creating supply issues there supporting prices.
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