Importers to gain from 22% dip in Indonesia coal prices



Source: THE ECONOMIC TIMES

Rising Indonesian coal production and lower Chinese demand have pulled down Indonesian coal prices by 22% over the last 45 days, a trend that augurs well for plants that import fuel.

China has restricted coal imports at many ports and plans to phase out a large number of thermal plants, hurting demand. Indian power generators are likely to increase imports because they face a supply crunch. It would also ease pressure on Coal India although it would increase dependence on foreign fuel.

Experts said prices are expected to fall further, keeping potential buyers away from the market as they are waiting for lower rates. Public sector power companies would continue to follow centre’s directive of not importing fresh consignments. A senior power company executive said: “As Indonesian prices fall, power plants within a radius of 150 km from ports will find it remunerative to import. Ash content in Indonesian coal is, at most, 10% while Indian coal contains ash of 30-40%.

Importing Indonesian coal makes sense for coastal plants even when it is costlier than Indian. However, for pit head plants, it is still a costlier option and will continue to be so unless prices fall drastically.” Deepak Kannan of S&P Global Platts in Singapore said price of freight on board Kalimantan 4200 GCV as received coal — a popular grade bought by both India and China in significant quantities — has dipped to $40 per tonne on Tuesday, from $51 late February.

According to a coal importer, the 4,200 kilo calorie gross as received (GAR) variety from Indonesia can be roughly compared to G11grade sold by Coal India. “Base price of G11 at pit head is Rs 1,145 per tonne. A consumer pays Rs 2,200-2,300 per tonne after paying handling charges, GST, Royalty and other levies. This coal when offered through e-auction fetches higher prices that could be as higher by 30-40% over the base price. In contrast the landed price of the Indonesian variety comes to around $50.19 (Rs 3,287) at ports,” the importer said.

However, price of 3,800 kilo calorie GAR is $42.63 per tonne (Rs 2,792), whereas basic price of G12 is Rs 1,063 and its ex-mine comes to Rs 1,800-1,900 per tonne.

Source: THE ECONOMIC TIMES