China resells Indonesian coal to India due to weak domestic demand, sufficient supply

Chinese traders are reselling Indonesian coal to Indian buyers due to sufficient supply and weak demand in the Chinese domestic market, a development that is likely to weigh on Indonesian coal prices in the near term, sources told S&P Global Commodity Insights May 11.

Asian coal traders said Chinese buyers have been absent from the seaborne coal market over the last few weeks, as COVID-19 lockdowns slowed industrial activity, trimming coal burn.

Many Indonesian coal producers have been anticipating Chinese buyers to return in the summer and boost coal prices.

Weak Chinese demand carries a downside risk for Indonesian coal prices as China accounted for the largest share of Indonesian coal imports in 2021, sources said.

"... that is not good as prices could fall. The Chinese demand has been very weak," an Indonesia-based producer said. "Demand is lowering, price is reflecting lower sentiment too. Another point should be vessel queuing at discharge ports due to COVID-19 restrictions."

The Kalimantan 4,200 kcal/kg GAR coal price was assessed at $92/mt on May 10, unchanged from April 10, according to S&P Global data, indicating rangebound Indonesian coal prices in the absence of Chinese buyers.

Indian support

Traders said that firm Indian demand was supporting Indonesian coal prices amid dwindling stockpiles at the country's power plants.

Stockpiles at Indian power plants were at 21.21 million mt, sufficient for less than eight days of coal burn, according to Central Electricity Authority data as on May 9. The number of power plants with critical stockpiles were 105.

Several import tenders by state-owned power producer NTPC and other state-owned power companies have been floated over the last few days as India faces rising summer demand with low stockpiles.

Sources do not expect Indian buyers to drive the prices higher in the long term as rains in several part of the country are expected to cool demand.

Domestic dynamics in China

Stockpiles at Qinhuangdao stood at 4.75 million mt May 11, while the price for the domestic 5,500 kcal/kg NAR coal was at Yuan 1,260-Yuan 1,350 ($187.43-$200.82/mt), according to a source.

"The long-term contracts are serving power plants at lower prices but the non-power sectors, like cement and glass, need high-CV coal which is short in supply," a China-based trader said.

The cargoes being resold are mostly Indonesian 3,800 kcal/Kg NAR coal, which are not required by these industries, the trader said.

Sources said that the industries are trying to procure coal in the domestic spot market to meet their requirements and tight supply is pushing the price of the domestic 5,500 kcal/kg NAR coal higher.

China imported 23.55 million mt thermal coal in April, up from 16.42 million mt in March. Coal and lignite imports to China fell 16% year on year over January-April to 75.41 million mt.