Indonesia: Thermal coal prices surge to two-month high on improved demand

• Inquiries from China, India up amid scorching summer heat
  
  
• Logistics issues in Sumatra due to bad weather hit supplies
  
  

Indonesian thermal coal prices continued their uptrend last week. Prices of high-CV (5800 GAR) coal increased by $1.51/tonne (t), settling at $96.09/t. Indonesian mid-CV coal prices (4200 GAR) increased by $0.21/t to $56.25/t. Meanwhile, prices of low-CV (3400 GAR) coal increased by $0.34/t to $35.47/t. Prices have climbed to two-month highs, as per data maintained with BigMint. Prices mentioned are on FOB basis.

Floods in Sumatra: On the supply side, floods in Sumatra have damaged production to some extent, but there has been mild rainfall in the Kalimantan region. There was also a problem with the availability of floating cranes in the market, creating a worrying situation in the Sumatra region. Additionally, there are some transportation problems in Sumatra due to bad weather, impacting supply from the region.

Festive holidays may further impact supplies: According to market participants, Indonesian supply is likely to face a crunch in June as producers are expected to work intermittently ahead of the religious festival holidays over June 16-17, 2024. Indonesian producers raised their offers by $2-$3/t on FOB prices for low-mid CV coal, as scorching heatwave conditions in importing countries kept buyers' interests high. The offer levels quoted by Indonesian producers were especially raised for high-calorific coal. This led to a disparity in bids and offers, as its availability was limited and inquiries from China were more focused on high-calorific coal last week.

Improved demand: Chinese demand is rapidly increasing, and demand from power plants will continue for at least the next two weeks. Summer demand is rising quickly, which has driven up daily consumption and increased inquiries for Indonesian coal. Chinese traders from southern China are actively buying as there is further expectation of heavy rain, which could disrupt supply in the coming days. The market price is fluctuating and uncertain, so most buyers from China are taking cargoes with a short delivery window.

Demand for seaborne coal from India rose amid increasing heatwaves in the country. During the monsoon season, Indian domestic supplies may remain restricted, leading mills to restock. Indian power plants continued to seek Indonesian 3,400 kcal/kg and GAR 4,200 kcal/kg cargoes, which, coupled with Chinese demand, made these grades the most liquid in the market at the moment. Buying interest from India shifted towards Panamax after higher freights for Supramax increased the landing prices for Indonesian cargoes. However, limited availability of spot Supramax cargoes increased Indonesian coal prices.

Portside prices of Indonesia thermal coal increase

Prices of 3400 GAR coal at Navlakhi Port stood at INR 5,350/t, while 4200 GAR at Kanlda Port was priced at INR 6,500/t. This increase in prices can be attributed to the rising power demand due to heatwaves in the country and the need for restocking.

Outlook

It is expected that Indonesian coal prices may increase further due to rising restocking demand from India over the next two weeks. Indian users are seeking Supramax cargoes due to increased freight rates for Panamax, and limited availability of spot cargoes may also contribute to higher offers. Additionally, demand from southern China is rapidly increasing due to the apprehension of heavy rain. With these increased demand and supply constraints in Sumatra, Indonesian thermal coal prices are likely to rise in the coming weeks. Also, with Indonesia set to observe a religious festival next month, supply may be affected, which may push up prices.