NEWS & ANALYSIS
Indonesian coals gain competitiveness in India
Lower-grade Indonesian coal increased its price advantage in India against South African product last week, as disruptions to shipments from South Africa's main coal export terminal buoyed prices.
The landed price of spot Indonesian GAR 4,200 kcal/kg coal into India was $42.35/t last week, accounting for freight costs, according to Argus assessments. By contrast, the price of South African NAR 4,800 kcal/kg coal, including freight, was $61.34/t on 9 June.
Taking into accout energy adjusting to NAR 5,500 kcal/kg, the cost of landed spot Indonesian GAR 4,200 kcal/kg coal was $65.60/t, while low-grade South African coal was at around $70.30/t at the end of last week. This left the discount for low calorific-value (CV) Indonesian coal at around $4.70/t to South African NAR 4,800 kcal/kg — its widest since mid-January — against $1.60/t a week earlier.
On a fixed price basis, gains in the low CV South African market outpaced those of Indonesian GAR 4,200 kcal/kg. The price of South African NAR 4,800 kcal/kg coal for loading in the front two months rose by nearly 13pc, or $6.10/t, to $58.80/t fob Richards Bay (RB) on 9 June, against the week ending 5 May, when the July market entered the assessment window. Fixed prices for NAR 4,800 kcal/kg coal were calculated using closing API 4 front-months swaps, minus index-linked prices provided by market participants and energy adjusted.
Most NAR 4,800 kcal/kg coal trades on an index-linked basis rather than on a fixed-price basis.
By contrast, Indonesian GAR 4,200 kcal/kg gained by less than 4pc, or $1.33/t, during the same period, and was assessed at $39.04/t fob last week.
During the same period, lower freight rates added to Indonesian coal's competitiveness in India. Average Argus-assessed Panamax freight rates for the route from Indonesia to India's east coast route fell by $1.72/t from the week ending 5 May to $6.28/t at the end of last week.
Argus-assessed Capesize freight rates for the route from Richards Bay to India's east coast remained flat — averaging $7.54/t at the end of last week, compared with $7.68/t for the week ending 5 May.
Rising API 4 front-month swaps have deterred some Indian buying interest, queues off Richards Bay grew to around 40 vessels near the end of May because of bad weather and technical problems at the coal terminal. API 4 July swap prices rose by $6.70/t from 5 May to close at $81.65/t on 9 June.
While API 4 swaps climbed, there was still spot demand from Indian trading firms' for Indonesian GAR 4,800 kcal/kg and GAR 5,000 kcal/kg grades, even as heavy rains in parts of Kalimantan hampered June loadings, market participants said. Bids for Indonesian GAR 4,200 kcal/kg coal for July loading were heard at around $40/t fob, with offers heard at premiums of about $1.50/t to the ICI 4 index today.
Indonesian GAR 5,000 kcal/kg coal — including freight and energy-adjusted to NAR 5,500 kcal/kg — narrowed to an 80¢/t premium to South African NAR 4,800 kcal/kg coal on 9 June from $5.20/t a week earlier. The Indonesian grade's premium has gradually narrowed a peak of $19.10/t in the week ending 10 March.
Taking into accout energy adjusting to NAR 5,500 kcal/kg, the cost of landed spot Indonesian GAR 4,200 kcal/kg coal was $65.60/t, while low-grade South African coal was at around $70.30/t at the end of last week. This left the discount for low calorific-value (CV) Indonesian coal at around $4.70/t to South African NAR 4,800 kcal/kg — its widest since mid-January — against $1.60/t a week earlier.
On a fixed price basis, gains in the low CV South African market outpaced those of Indonesian GAR 4,200 kcal/kg. The price of South African NAR 4,800 kcal/kg coal for loading in the front two months rose by nearly 13pc, or $6.10/t, to $58.80/t fob Richards Bay (RB) on 9 June, against the week ending 5 May, when the July market entered the assessment window. Fixed prices for NAR 4,800 kcal/kg coal were calculated using closing API 4 front-months swaps, minus index-linked prices provided by market participants and energy adjusted.
Most NAR 4,800 kcal/kg coal trades on an index-linked basis rather than on a fixed-price basis.
By contrast, Indonesian GAR 4,200 kcal/kg gained by less than 4pc, or $1.33/t, during the same period, and was assessed at $39.04/t fob last week.
During the same period, lower freight rates added to Indonesian coal's competitiveness in India. Average Argus-assessed Panamax freight rates for the route from Indonesia to India's east coast route fell by $1.72/t from the week ending 5 May to $6.28/t at the end of last week.
Argus-assessed Capesize freight rates for the route from Richards Bay to India's east coast remained flat — averaging $7.54/t at the end of last week, compared with $7.68/t for the week ending 5 May.
Rising API 4 front-month swaps have deterred some Indian buying interest, queues off Richards Bay grew to around 40 vessels near the end of May because of bad weather and technical problems at the coal terminal. API 4 July swap prices rose by $6.70/t from 5 May to close at $81.65/t on 9 June.
While API 4 swaps climbed, there was still spot demand from Indian trading firms' for Indonesian GAR 4,800 kcal/kg and GAR 5,000 kcal/kg grades, even as heavy rains in parts of Kalimantan hampered June loadings, market participants said. Bids for Indonesian GAR 4,200 kcal/kg coal for July loading were heard at around $40/t fob, with offers heard at premiums of about $1.50/t to the ICI 4 index today.
Indonesian GAR 5,000 kcal/kg coal — including freight and energy-adjusted to NAR 5,500 kcal/kg — narrowed to an 80¢/t premium to South African NAR 4,800 kcal/kg coal on 9 June from $5.20/t a week earlier. The Indonesian grade's premium has gradually narrowed a peak of $19.10/t in the week ending 10 March.
This analysis was published in Argus Coal Daily International.
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