Indonesian thermal coal prices exhibit downtrend w-o-w

Indonesian thermal coal prices exhibited downtrend this week. Prices of high-CV (5800 GAR) coal decreased by $0.66/tonne (t), settling at $96.21/t. Indonesian mid-CV coal prices (4200 GAR) decreased by $0.68/t to $55.31/t. Meanwhile, prices of low-CV (3400 GAR) coal decreased by $0.45/t to $34.90/t. Prices are on FOB basis.

On the supply side in Indonesia, except for some parts of South Kalimantan facing moderate rain, there has hardly been any supply crunch due to this. Miners were heard holding onto their higher offers in expectation of rising summer demand in China. According to market participants, miners are also trying to avoid creating an oversupply situation. Indonesian high-CV coal prices have been rising for a few weeks due to constant inquiries from Japan. Although Indonesia generally witnesses severe rainfall in June, if this is the onset, miners are likely to face production headwinds in the coming weeks. Producers could also raise their offers if the rain intensifies, prompting buyers to increase their bids as well.

Stocks in China have been at a decent level since last week, according to market participants, due to a rise in production from domestic mines. Rainfall continues in southern China, and the severe downpour has boosted hydroelectricity production and reduced coal consumption, affecting China's demand for Indonesian coal. Moreover, demand from the northern region, which did not witness significant rainfall, remained stable, keeping domestic production as the primary source of fuel. Currently, Chinese buyers are trying to fulfill only 10% of their coal requirements from the spot market, booking most cargoes under term contracts for a year or more.

Indian power plants, the major importers of thermal coal, are operating with sufficient existing stocks, limiting the purchase of seaborne cargoes. Additionally, the country's rising domestic coal production has further lowered sentiment for imports. Although heatwaves continue in several states, increasing coal burn for electricity generation, their impact on demand for seaborne cargoes has not been significant due to the availability of domestic stocks and a streamlined domestic supply from mines to plants. As summer demand in India is almost coming to an end, market participants noted that this year's summer demand was less due to freight rates not being agreeable to Indian buyers, leading to higher-than-expected landed costs.

Portside prices inch up

Prices of 3400 GAR coal at Navlakhi Port stood at INR 5,150/t, while 4200 GAR at Kanlda Port was priced at INR 6300/t.

Outlook

Indonesian coal prices may increase in the upcoming weeks as the country generally witnesses severe rainfall in June. If this is the onset, miners are likely to face production headwinds in the coming weeks. Producers could also raise their offers if the rain intensifies, prompting buyers to increase their bids as well. However, this could be affected by lower demand from India, as temperatures are dropping and cooling demand has reduced. Additionally, increased Chinese production might affect imports from Indonesia, considering that India and China are major importing countries.