Indonesia raises March thermal coal reference prices for most grades amid new pricing regulations

Indonesia raised its March thermal coal reference prices, the Harga Batubara Acuan, for all grades except 3,400 kcal/kg GAR coal, according to an official document seen by Platts March 1.

The Indonesian Ministry of Energy and Mineral Resources had enacted a new regulation, effective March 1, mandating that coal sales to the overseas market be priced exclusively based on the HBA. Earlier, spot and long-term contracts used indexes from independent price reporting agencies.

The price for 6,322 kcal/kg GAR high-grade thermal coal, on which the HBA pricing has traditionally been based, rose 3.21% from the February HBA price to $128.24/mt in March, while the price of 5,300 kcal/kg GAR rose marginally by 0.48% since February to $82.66/mt.

The country set the HBA for 4,100 kcal/kg GAR grade at $50.70/mt in March, up 0.35% since February's HBA price, the document showed.

Platts, part of S&P Global Commodity Insights, assessed the price of 4,200 kcal/kg GAR coal at an average of $48.20/mt FOB in February, compared to $48.58/mt FOB in January. Platts last assessed the grade at $48.55/mt FOB on Feb. 28.

Indonesia lowered the HBA for low-CV 3,400 kcal/kg GAR coal by 0.63% from the last price published in February to $34.16/mt for March.

Platts started assessing the 3,400 kcal/kg GAR grade on Jan. 2 at an average of $29.92/mt for February, compared to an average of $30.60/mt in January. Platts assessed the grade at $30.25/mt FOB Feb. 28.

The coal price benchmark will be published bimonthly on the 1st and 15th of each month, according to the document. For the HBA released on the 1st, the calculation will consist of 70% of coal sales prices submitted by miners from the fourth week of two months prior to the first week of the previous month, and 30% from prices reported during the second and third weeks of the month before the release.

Market takes time to adjust

Participants remained undecided on how to implement the HBA pricing from existing shipments.

"We are still investigating the impact but the government system to submit miners' sales won't allow if the provisional price/final price is lower than the benchmark coal price or the Harga Patokan Batubara, and the HPB price should be calculated from HBA based on coal quality and specifications -- calorific value, total moisture, total sulfur, ash," said an Indonesia-based miner.

"Discussions are ongoing as buyers are not ready for the HBA pricing yet. They may convert index-linked deals to fixed numbers. A way out will be found, however, new deals would be a problem until clarity is there," said an India-based trader.

The HBA pricing mandate would hinder indications of price movement as buyers are unlikely to comply with the new regulation, which would further lead to uncertainties, sources said.