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Indonesian electricity company PLN tells miners to boost domestic thermal coal supply

Highlights

Kalimantan price hits 2.5-year high

Limited availabilities amid heavy rains

Singapore — Perusahaan Listrik Negara, Indonesia's state-owned electricity company, has told at least six miners to supply at least 1 million mt more thermal coal to the domestic coal market from January to February in accordance with the Domestic Market Obligation, market sources said.

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Various traders in China said that many buyers in the country had received letters from miners to defer their laycan from January to March for up to one week, while some cargoes were canceled by miners in order to divert tonnages for the domestic Indonesian market.

A new wave of demand emerged in China seeking near-term cargoes to cover their short positions. However, availabilities were limited as more miners were sold out amid strong demand in China and worsening weather conditions for production ramp-up, sources said.

"It is so short of coal in Indonesia, so even if there is a shortfall, it could be challenging to secure cargoes amid scarce availabilities," a China-based trader said.

"Domestically, we are short of coal as well, but I can't miss the good profit margins of supplying to China," a Indonesia-based miner said.

Given the strong Chinese seaborne thermal demand, although it is preferable for miners to fetch better margins by exporting coal now, it is mandated for the sellers to provide some cargoes domestically, another miner said.

Export prices for Indonesian coal were higher than domestic coal prices, prompting many miners to not fulfill their commitments to domestic buyers, another miner said.

PLN was not immediately available for comment on the matter.

Price movement

Indonesian coal prices inched up as more Chinese import quotas were released for Indonesian coal as a result of the Australian coal ban in China and a series of safety maintenance programs for Chinese coal mines on Oct. 1, while pockets of post-monsoon demand started to emerge in India also, sources said.

The 7-45 day price of FOB Kalimantan 4,200 kcal/kg GAR coal increased 213% from mid-September till date, rise from $22.50/mt FOB Kalimantan to $47.95/mt FOB Australia.

The 7-45 day price of FOB Kalimantan 4,200 kcal/kg GAR coal hits a 2.5 year high $47.95/mt on Jan. 13.

Weather conditions

Thermal coal producers in Indonesia are feeling the strain of heavy rains and high swells, which in turn impacted their production and export capacity, according to sources.

A producer source noted that rains have had the worst impact on coal production in South Kalimantan, followed by Central and East Kalimantan provinces.

"PLN has requested Indonesia-based miners to provide some cargoes for the domestic market, and some volumes have been heard channeled towards the domestic industries," he said.

He said that Indonesia's Ministry of Energy and Mineral Resources has been monitoring the domestic market obligations for miners between the period of December 2020 to January 2021, where poor weather conditions may be unfavorable for export activities as well.