Usually, approvals for higher production comes latest by September-end, but it got delayed this year, prompting miners to think that the approvals were unlikely to set in this year, two traders from Indonesia said.Thermal coal miners in Indonesia generally submit their production plan, locally known as RKAB, by the November-December period for the upcoming year. They are also given a provision to revise their output target by the month of July next year. To execute their revision plan, the miners require the government's permission, without which they cannot produce or sell the fuel more than what they had submitted earlier.
According to an Indonesia-based trader, the government has given permission to some major coal miners including PT Jhonlin Group, Bayan resources, PT Borneo Indobara (BIB) and PT Insani Baraperkasa for additional output in the November-December period.
A company official from Bayan confirmed the information to S&P Global, while another official from Golden energy Mines, which holds a majority stake in PT Borneo Indobara, also confirmed the news, adding they received approval for 6 million mt. "We already have booking for about 4 million mt, which we will try to fulfill now, and for the remaining volume we will first assess the demand situation and act accordingly," the official added.
However, the official from Bayan did not comment on the approved volume. The other two mining companies did not respond at the time of publishing, while a ministry official could not be reached immediately.
Several other Indonesia-based sources said the government is expected to issue more approvals in the coming days.
The development follows an existing supply tightness due to lack of additional production quota and uncertainties about several miners' supply commitments. Consequently, many producers including some large ones, were also heard to be delaying shipments as they were on the verge of exhausting their existing production quota, sources said.
The move also comes at a time when demand from the top consumer China has slowed down significantly, pushing the bid levels down from what they were a week ago. As a result, Indian buyers were also heard to be waiting for a price correction. Bids for Kalimantan 4,200 kcal/kg GAR were heard at $56.50/mt FOB and $58/mt FOB on Supramax basis for November-December loading cargoes Nov. 1, as compared to $62.50/mt FOB for November-loading cargoes a week ago.
The average price of Kalimantan 4,200 kcal/kg GAR was at $60.32/mt in October, compared with $53.53/mt in September, according to Platts data from S&P Global Commodity Insights.
If the falling demand trend perpetuates longer from China, it will likely offset the impact of supply constraints which was aiding the prices until last week, an Indonesian trader mentioned earlier. However, the trader believes the recent development is certainly going to ease out the ongoing supply crunch in Indonesia.
Indonesian thermal coal prices had started to decline due to falling global demand at the beginning of the year after being elevated because of the geo-political conflict between Russia and Ukraine. However, in October, prices remained relatively higher fueled by aggressive purchase from China to replenish stocks due to upcoming winter. Some sources believe that even though currently there is a lull in Chinese demand, buyers are expected to be back soon to fulfill their winter restocking.
