04 Mar 2021

Indonesian Coal Exports Stutter in January

04 Mar 2021  by Saurabh Chaturvedi   

Indonesia exported another record-high volume of coal to China in January, but overall shipments stuttered amid weather-related disruptions and fewer loadings for other key markets.

Indonesia, the world's largest thermal coal exporter, shipped 38.2mn t in January, which was broadly unchanged from a year earlier, customs data show. But exports were down from 40.59mn t in December, representing the first month-on-month decline since September 2020.

This drop came amid steep price rises, suggesting that there were some supply-side constraints alongside the strong Chinese demand. Argus' GAR 4,200 kcal/kg and GAR 5,800 kcal/kg fob Indonesia price assessments both rose by more than a third on the year to 30-month highs of $47/t and $80/t in January, respectively.

Indonesian coal production slipped to around 47.2mn t in January, from 51mn t a year earlier and 48.2mn t in December, provisional government data show, although data reporting lags mean that the final January total could be higher.

Inclement weather in January may have slowed production and hampered internal logistics. Average daily rainfall in Banjarmasin, South Kalimantan, was double the 2016-20 seasonal average in January at 30 mm/day, according to Speedwell Weather data (see chart).

The Indonesian government has set an unchanged 550mn t target for coal production this year, although 2020 output exceeded this at 563mn t, according to government data.

Indonesian coal prices eased in February, coinciding with weaker Chinese demand during the lunar new year holiday and lower-than-average rainfall in Indonesia. But Chinese coal demand is showing some signs of stabilising, with more factories ramping up industrial activity at a time when heavy snowfall in parts of Inner Mongolia — China's second-biggest coal-producing region — has disrupted coal output and logistics.

Yet the recent jump in freight rates could weigh on demand for seaborne cargoes from importing countries, including China and India.

Record exports to China

Shipments to China, the biggest importer of Indonesian coal, hit an all-time high of 19.97mn t in January. This was up by 6.92mn t on the year and 2.4mn t higher than in December 2020 (see chart).

The surge in Chinese demand was supported by an informal ban by Beijing on imports of Australian coal and by unseasonably low temperatures, which lifted heating and power demand.

Indonesian GAR 4,200 kcal/kg (NAR 3,800 kcal/kg) prices hit a near-three-year high of $49.89/t on 22 January before easing as demand slowed ahead of the seven-day holiday in China. The price was last assessed by Argus on 19 February at $39.21/t fob Kalimantan.

Record Chinese demand and domestic supply disruptions limited availability for Indonesia's other key markets, while strong price gains may also have deterred buyers.

Exports to India — the second-biggest importer of Indonesian coal — fell by 3.09mn t on the year to 6.71mn t in January, and were down by 2.4mn t from December. Shipments were pressured by high inventories at utilities and state-controlled producer Coal India, as well as by Delhi's push to discourage the use of imported coal.

Indonesian shipments to India also faced competition from Australia, whose exports to India reached an historic high as suppliers sought alternative markets because of the Chinese ban.

On an India-delivered and energy-adjusted price basis, GAR 5,800 kcal/kg Indonesian coal was around 13pc more expensive than NAR 5,500 kcal/kg Australian material in January, according to Argus analysis.

Indonesian shipments to South Korea fell by 1.2mn t on the year to 1.29mn t in January, as winter restrictions on coal-fired power plants weighed on consumption.

Shipments to southeast Asia also eased in January. The decline was mainly led by Vietnam, where overall coal imports eased after hitting record highs in 2020. Vietnamese demand last year also underscored the emergence of Australia as a key supplier of all grades of coal to the country.

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