Indonesia will continue facing pressure from weak coal price

By Cepi Setiadi

Indonesia?s coal industry will continue facing pressure from weak prices over the next several months but Indonesia will remain a dominant supplier, according to an analyst.

Deepak Kannan, Associate Editor for Coal at Platts McGraw Hill Financial said in his presentation at the 3rd Annual Business Meeting of Indonesian Coal Buyers and Producers in Bali on Monday that Indonesian thermal coal prices are expected to remain low amidst weak demand from both India and China in the spot market.

He, however added that India?s demand for lower CV coal will continue to be strong as the country?s domestic production is not enough to fully meet the demand, while Chinese buyers are projected come back to the market for imported coal in the fourth quarter

Deepak said the reason that low rank coal is still preferred is that high CV or benchmark coal is too expensive.

Another factor is that boilers in India are designed to burn lower grade coal as direct fuel and such coal is similar to the domestic coal. "Chinese are buying lower grade coal for the purpose of blending it with their high CV domestic coal," he said.

Deepak said there has been an increase in the coal price coal price since December last year, which among others because several Chinese and Indian buyers booked cargoes in December and January as prices were low.

"Chinese wanted cargoes before the Lunar New Year while some Indians reportedly picked up cargoes for delivery up to June," he said adding that rains in Indonesia led to supply constraints, affecting production at some small to medium sized miners which contributed to the price rise.

"Cargo loading was affected by rains during March to May, leading to the thinning of new offers in the market," he added.

Editing by Johannes Simbolon