Tight Indonesian supply supports thermal coal prices, Xcoal says

By Adianto P. Simamora

Tight Indonesian supply and rising import costs supported thermal coal prices over the first four months of the year, with Xcoal saying the market showed unusual strength during the March-April season, when demand typically weakens.

Speaking in Xcoal’s China Coal Market Review and Outlook webinar on Thursday, Emma Yang of Xcoal said the coal prices moved higher despite brief pullbacks.

 “Normally, March and April are the season when demand softens and prices come under pressure, but this year is different…(coal) prices didn't drop. They actually moved higher despite some brief pullbacks. So overall, we are seeing clear off-season strength,” she said.

She said the trend began in the import market, where Indonesian supply was already tight at the start of the year due to slower RKAB approvals and a lower production target.

Read also : Shanxi Coal flags caution on coal trade amid Indonesia policy, price risks

Yang said the coal market tightened further in late February after the Middle East conflict pushed up the global energy prices and freight costs.

 “Imported coal became more expensive and, in some cases, was priced above domestic coal, closing the arbitrage window and prompting some buyers to return to the domestic market,” she said.

On the China domestic side, she said April maintenance on the Daqin River reduced the coal inflows to northern ports and pulled inventories lower.

At the same time, demand from power plants remained relatively high for the off-season, while non-power demand from sectors such as coal chemicals also started to pick up.

Editing by Reiner Simanjuntak