Indonesian thermal coal prices up; imported-domestic price gap in India widens

The Indonesian Coal Index (ICI) especially for high-CV 5,800 GAR coal rose to a historic high of $114/t FoB, while other grades also saw a w-o-w increase.

The rise this week is not only driven by elevated demand from China but also from increased coal requirement from state utility Perusahaan Listrik Negara (PLN) whose plants are left with only 10 or lesser days of stock for burn.

Indonesian thermal coal prices

*Price in $/t

 Indian buyers opt for cheaper domestic coal

Amid rising Indonesian thermal coal prices, Indian users have taken a break from booking the imported variety since the past few weeks.

The disparity between the landed cost of the 4,200 GAR Indonesian coal (ex-Kandla, including cess and GST) at present and the equivalent grade domestic coal (from WCL mine, after adding all duties and taxes) stands at INR 3,500-4,000/t.

On the other hand, the difference between the portside price of the 4,200 GAR for old stock at Kandla Port and WCL mine’ equivalent grade stands at around INR 2,500-3,000/t.

Many power companies in India preferred the 4,200 GAR Indonesian coal. But, owing to the sharp rise in imported coal prices, they have either switched to low CV imported coal of 3,400 GAR or have resorted to blending with domestic coal.

As per CoalMint data, coal imports of state-run power plants that imports coal for blending were significantly reduced by 78% y-o-y to 0.21 mn t during the Apr-Jun’21 period, power ministry data showed.

Though sectors such as steel, ceramics, chemical, edible oil, and sugar located majorly in the western belt continued to procure imported coal in smaller quantities, bulk bookings from these sectors remained under pressure.

Market participants informed CoalMint that there is hardly any new stock of the 4,200 GAR available at Kandla Port while the limited quantity of old stock available is being offered at INR 6,700/t.

Portside offers for 5,000 GAR in Kandla have also risen to INR 7,800/t, in case of advance payments (prices exclude cess and GST), up 12% m-o-m basis.

Indonesia sees increased domestic demand

At present, Indonesian coal miners in the country are facing another major concern. That is of domestic supply shortage as producers there resorted to diverting more coal into exports.

Coal stocks with several power plants under Indonesian power utility PLN are heard to be depleting rapidly and miners have delayed their export consignments to supply to the domestic power plants, informed market participants.

Ever since Indonesian coal prices started rising this year, miners have been focused more on selling their output abroad as against complying to sell their output at the DMO prices of $70/t for domestic power producers in Indonesia.

As per the coal mining association (APBI), domestic miners are required to sell 25% of their total planned output domestically.

Meanwhile, the spreading Covid-19 virus also continued to impact some of the mines in South Kalimantan as few had to suspend production, exacerbating the tight supply situation in the country, informed market participants.

Eastern China coal demand cools off slightly

Demand from China continued to remain strong amid depleting stockpile at ports and tight supply at power plants. However, Typhoon In-Fa making landfall in Eastern China last week has resulted in slight easing in air-conditioning demand in the region, informed market participants.

Thermal coal stock at Qinhuangdao Port, a major coal transfer hub in northern China, rose slightly to 3.96 mn t w-o-w, towards the end of last week.

Short-term outlook

CoalMint believes, Indonesian coal prices are likely to remain elevated in the near term amid tight supply conditions in the country and robust procurements from China.

Though miners in Indonesia have already ramped up output, the rising Covid-19 cases may continue to disrupt operations.

Indian demand is likely to pick up post-monsoons as buyers were heard to be making inquiries for Sept’21 shipments.