Resumption of Chinese buying boosts Indonesian low CV thermal coal prices

Indonesian thermal coal prices have shown a mixed trend in the past week. Low-CV (3400 GAR) coal prices were up by $0.05/t to $38.01/t, while high-CV (5800 GAR) coal prices dropped by $0.13/t to $93.03/t.

On the supply side in Indonesia, the delay in approving production quota has introduced uncertainty into the market. The upcoming elections in Indonesia next year are causing prolonged wait times for approving next year's production quota. With the submission of production plans now extended to a three-year period, Indonesian miners are exercising caution in setting their targets, influenced by the unstable demand in the thermal coal market. Another reason causing a supply issue in Indonesia is that some mines have faced logistical challenges due to rain and flooding. However, these rain-related issues are not anticipated to result in significant supply constraints.

Overall demand in the Asian thermal coal market stayed subdued. The ongoing temperature drop in China has edged up some demand recently. Provinces in north China are facing heavy snowfall which has lowered down the temperatures. This is expected to bring in Chinese demand for low CV material. Demand for high CV from China is anticipated to be on lower side amid high domestic production in China. Also, utilities were seen being cautious in booking January loading cargoes that might arrive before February's lunar new year holidays, as these days are marked by low industrial activities, and rise in temperature and hence reducing coal burn rate.

Demand from Indian buyers continued to be subdued, characterized by reduced industrial activity and a slight oversupply, resulting in a downturn in consumption patterns. Indian buyers adopted a cost-sensitive approach and favored South African coal due to its low prices. South African coal remained the primary interest among Indian buyers. Indian robust domestic production continue to exert pressure on imported coal price levels.

India: Portside prices down marginally

Thermal coal prices for 4,200 GAR coal at Kandla Port remained majorly in line with that in the previous week, at INR 6,100/t amid low buying interest in the domestic market.

Outlook

Indonesian thermal coal prices may experience a upward trend as production approvals are awaited, injecting some uncertainty into the market and affecting miners' commitment levels. Also, anticipated rise in Chinese buying on falling temperature may support price hike.