Indonesian thermal coal prices, that were observing a declining trend since the past two months, have seen some positive movement this week.
While market participants expect a rise in tomorrow's index, offers to India are currently heard at a premium of $3-4/t over last week's index prices.
The December offers for the popular 4200 GAR are currently heard at a premium of $4/t over the index price of $87/t, FOB South Kalimantan basis. The freight for a Supramax vessel between India and Indonesia is assessed at $18/t west coast.
Why have prices risen?
The rise in prices can be attributed to the sudden demand from China due to temperature drops in many parts of the country. The strongest cold wave since November-end has hit many parts of China, affecting more than 20 provinces. The cold wave has led to strong winds, with temperatures tumbling by 12-20 degrees and even causing casualties. Offers for mid-CV cargoes of 4600 kcal/kg NAR are heard at $120/t or above and 4500Kcal/kg NAR bids are at $115/t FoB.
Chinese utilities have strengthened their restocking activity as their domestic coal prices have seen a rise of around RMB 50-70/t ($8-10/t) since 28 November.
India's portside demand stable
Indian buyers are restraining from making purchases as domestic coal is available cheaper compared to imported Indonesian material, informed market participants.
The power plants' stock as on 30 November stands at 31 Mt - sufficient for 15 days, according to data from the Central Electricity Authority.
"October-March is generally when there is peak demand for imported coal. However, the prices for high CV coal are raised and buyers are waiting for these to come down. The power industry is blending more of domestic coal with imported due to high prices," said a trader based in Gujarat.
"The textile industry in Gujarat is also working below its capacity - at 60% levels - as demand is yet to pick up post-monsoons and Diwali," the trader further added.
The portside price of 4200 GAR Kandla Port was assessed at INR 8,500/t, whereas 3400 GAR Navlakhi portside prices were at INR 6,900/t.
Outlook
The rise in Indonesian thermal coal prices is anticipated to be temporary as market participants are skeptical of Chinese demand this month, citing multiple factors. This includes early arrival of Chinese Lunar New Year holidays, weak industrial activity amid strict Covid controls and high inventory with power plants. The Chinese power plants are anticipated to have coal stockpiles sufficient for 17 days. This, coupled with steady supply of domestic coal under term contracts, are likely to subdue China' s demand for imported coal.
This article has been published under the exchange agreement between Sxcoal and CoalMint.
(Writing by Tammy Yang Editing by Harry Huo)
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