Indonesian coal prices stare at downtrend amid lack of China demand: sources

Indonesian coal prices are likely to decline in the near term as Chinese buyers stay on the sidelines amid a fall in the latter's domestic coal prices, sources told S&P Global Platts Feb. 16.

The development comes after China's top economic body, the National Development and Reform Commission, or NDRC, said that the price of 5,500 kcal/kg NAR will be considered stable below Yuan 900/mt ($142.07/mt) at ports, Platts reported Feb. 11. The NDRC asked coal producers to step up production and urged sellers to sell at a stable price level.

The price of Qinhuangdao 5,500 kcal/kg NAR was heard at Yuan 900/mt FOB on Feb. 15, a 20% correction from Feb. 11, according to sources.

"China seems to be a bit softer in the market and the domestic prices [in China] are under pressure. We believe the cancellation of tenders last week was also driven by the priority that prices should be low," an Indonesia-based trader said. "Fundamental demand is there but pressure to keep prices lower is weighing on the activity." The trader expects Indonesian prices to fall $2-$3/mt in the week to Feb. 19 for all the grades.

China -- the world's largest producer and importer of coal -- is also one of the top importers from Indonesia, accounting for 10 million-12 million mt per month on an average. The country produced 4.07 billion mt of raw coal in 2021, 4.7% higher on the year and imported 320 million mt, up 6.6% on the year, the customs data showed.

Indonesian supply tightness

After Indonesia imposed a blanket three-week ban on coal exports in January, Chinese domestic coal prices had risen sharply. Even though the ban was eased by Jan. 21, producers focused on fulfilling backlogs leading to further supply tightness for the Indonesian coal.

The 4,200 kcal/kg GAR Indonesian coal price has risen to $77.95/mt on Feb. 15 from $63.45/mt FOB on Dec. 31, Platts data showed.

Some Indonesian producers, however, believe that the market may see muted activity but there was limited room for coal prices to fall due to the prevailing tight supply.

Logistical bottlenecks such as unavailability of vessels and barges, concerns about delay in coal discharge at state-owned power company PT Perusahaan Listrik Negara, or PLN, and pending backlogs from January lifted Indonesian coal prices before the NDRC statement on Feb. 11.

China's stockpile situation

Stockpiles at Qinhuangdao, meanwhile, improved to 5.05 million mt on Feb. 14, from 5.01 million mt on Feb. 11, sources said.

China's domestic coal stockpiles at its power plants are believed to be at record highs of around 160 million mt, boosted by the country's moratorium on coal-fired generation during the Winter Olympics in regions surrounding Beijing, according to a report by S&P Global Platts Analytics Feb. 13.

"Platts Analytics believes Chinese demand will remain muted as domestic production appears sufficient for near-term demand," the report added.

Meanwhile, market participants expect buyers from India and Thailand to step in if prices become more favorable, sources said.