The thermal coal market continues to remain in the backfoot with buyers not willing to book in current volatile environment. It was heard that the ongoing heatwave across some parts of India will boosts demand for coal burn. However, despite this, the seaborne coal prices depicted a fall for the week. As per market participants, buyers will show buying interest only when prices bottom out.
The price drop in Indonesia has prompted some miners to reduce output as profit margins decline to near production costs. This may affect the Indonesian coal target for the year 694.5 mnt, however, may rebalance the oversupply in market. Weak sentiments in low calorific value Indonesian thermal coal market persisted because of high stock and surplus availability inhibiting market activity.
Activities in China also remained muted. It is expected to continue for a fortnight. However, the impact of domestic Chinese price rise is yet to be absorbed by Indonesian cargoes shipped to the country amid high inventory levels.
Indonesian coal benchmark slashed for June
Indonesian government has slashed thermal coal reference price (HBA) for the third straight month in June since introducing a new pricing mechanism. The HBA is used to set the prices of different coal specification for domestic sale, as well as the amount of royalties that domestic miners need to pay to the government before they are allowed to export their coal.
1. The HBA, based on 6322 Kcal/kg GAR, was set at $191.26/t for June, down $14.9/t from the May level.
2. The HBA I (5200 Kcal/kg GAR) dropped $7.05/t m-o-m to $112.59/t.
3. The HBA II (4200 Kcal/kg GAR) fell $3.88/t from May to $78.35/t.
Indonesian thermal coal export falls for May'23
Indonesia's thermal coal exports in May fell by 4% m-o-m to 29.09 million tonnes (mnt) as against 30.34 mnt in April, data from Statistics Indonesia showed. China was Indonesia's largest thermal coal export destination, with 8.05 mnt of coal being shipped to the country, surged around two-folds y-o-y and down 13% m-o-m as against 9.30 mnt in April.
India: Portside prices fall w-o-w
Thermal coal prices of 4200 GAR coal at Kandla Port dropped to INR 6,700/t, down INR 100/t w-o-w. Prices fell amid subdued buying from major Asian countries amid high stockpiles.
Outlook
The Indonesian thermal coal market dropped for the week and it is anticipated to continue witnessing the same trend amid high inventory levels with end-users. However, with rising temperatures, power demand may pick up and with some buyers speculating prices to have bottomed out the thermal coal market may witness a demand revival.
