Indonesian coal miners shift to domestic sales as China demand slips

Mysteel Global: Inactive purchases from Chinese buyers have driven Indonesian thermal coal miners to ramp up thermal coal sales to domestic users as of 29 July, a measure aimed at rebalancing the supply-demand relation in the export market, market sources said.

Although coal consumption at coastal power plants in South and East China continued to rise, their high stockpiles of the fuel and stable domestic supplies under long-term contracts denote no trepidation among those utilities to scramble for new coal cargoes from the import market, Mysteel Global noted.

According to market sources, major power plants in coastal provinces held coal stockpiles equivalent to 15 days of use on average as of 24 July, almost the same as the week-ago level. With stockpiles already built high, coastal utilities have mostly completed purchases for August, now primarily seeking Indonesian coal for September delivery via their tenders, sources noted.

On 26 July, a power producer in Southeast China's Fujian province received offers at yuan 512-523/tonne ($70.5-72/t), CFR with VAT, from Chinese traders for its tender seeking Panamax cargoes of Indonesian 3,800 kcal/kg NAR coal for 1-30 September delivery, market sources shared. That can be net back to $52-54/t FOB Kalimantan.

To fulfill deliveries to utilities in September, traders bought several spot cargoes last week. According to sources, an August-loading Supramax cargo of Indonesian 3,800 kcal/kg NAR coal traded at $51.5/t FOB East Kalimantan, an August-loading Panamax cargo of the same grade changed hands at $53.5/t FOB South Kalimantan.

Meanwhile, Mysteel Global learned that China's demand for Indonesian cargoes with mid-to-high calorific value (CV) increased slightly, with a 5,000 kcal/kg GAR Panamax cargo for end-August loading traded at a price equivalent to $72.8/t FOB East Kalimantan.

Sources said vessel congestion at South China ports has alleviated somewhat by Monday, but that would barely boost purchases of imported thermal coal from Chinese traders.

As such, Indonesian thermal coal miners ramped up domestic sales to complete their Domestic Market Obligations (DMO), sources noted. Under the DMO rule, Indonesian coal miners should supply 25% of annual output to domestic coal users.

Sources told Mysteel Global some power plants attached to PT Perusahaan Listrik Negara (PLN), the state-owned power group that provides the majority of power for the country, were facing challenges of low coal inventories.

In terms of prices, Indonesia's domestic selling prices for 3,800 kcal/kg NAR grade, which topped all grades received by the PLN, remain cheaper than export prices, said an Indonesian miner. "Coal selling prices to domestic private industries are similar to the export prices," the miner said.

chenziyi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.