core sector communique

INDIA IMPORTED 11.40 PERCENT MORE INDONESIAN COAL IN AUGUST

Indonesia, the world largest multi grade coal exporter, shipped 26,451,565* tons of coal in August 2012, compared to 27.88* million tons in July 2012. The August coal exports down or drops 5.15 percent from compared to July exports.

According to available information from coal exporters, the India was the largest importer of Indonesian coal in July and August overpasses China as the largest Indonesian coal importer in past. China’s Indonesian coal imports has dropped to 4.99* million tons in August, in the meantime India's imports stable at 7.57* million tons. Indian utilities import 11.40 percent more coal in August compared to its July Imports.

Indonesia's coal exports to China has dropped by 16.10* percent in August to 4.99* million tons compared to last month, but to India increased by 11.40* percent. Indian utilities imported 7.57* million tons in August, compared to 6.79* million tons in July 2012.

80.14* percent of total Indonesian coal exports in August shipped to top five traditional coal importers of Indonesian coal such as India, China, Japan, South Korea and Taiwan.

“Inquiries from India and China are still in the market, but the conclusions rates are lower compared to floating of inquiries" said an international coal trader. The FOB bids are not favoring suppliers at this moment, the gap between offers and bids are quite wider he added.

Most of the Indonesian small scale miners have suspend their coal production, as those mine’s operation cost were higher than current coal prices.

5,000 kcal/kg GAR coal from Kalimantan is being offered low sixties, however the last week offers and bids were quite positive than previous weeks. According to market information, some deals have been concluded at high fifties.

In the meantime, a 5,800 kcal/kg GAR coal is being offered around mid seventies, a trader said. There is not much conclusions this in week. “The profit margins are almost nearing to zero for those who sell coal on spot deals and low GCV / High moisture producers”, a small scale coal producer from South Kalimantan said.

Indian buyers are aggressive to buy low GCV coal even coal with GCV around 3000- 3200 GAR. A market information indicates that, some deals from Sumatra to India were concluded at around US$ 26 - 27 FOB vessel for 3200 - 3400 AGR coal. Low GCV coal exports from Indonesia makes India the largest coal importer for last two months.

According to mining law 4/ 2009 all the miners in Indonesia to requires all coal exporters to follow government declared coal prices ( HBA) when they conclude a coal sales and purchase contract with their buyers.

The government declared minimum selling price of Indonesian coal for September delivery was higher than July minimum price. However, the producers, specially who are selling their coal on spot basis, forced to sell lower than HBA price but paying royalties and corporate taxes based on HBA prices. The reference price is to be used by coal producers for all spot and term contracts. This coal benchmark price is stated as using a formula based on the index average of ICI-1 (Indonesia Coal Index), Platts-1, Newcastle Export Index, and global Coal Index. The assessment basis of the coal price reference was calculated considering coal with GCV 6,322kcal/kg (GAR), Total Moisture (AR) 8.00%, Total Sulphur 0.8% (AR), Ash Content 15% (AR) and delivery Free on Board (FOB) Vessel basis.

The government declared HBA in September increased by 1.84 percent M-O-M and dropped 25.85 percent Y-O-Y.

The Ministry of Energy & Mineral Resources of Indonesia sets the coal’s spot price benchmark for September 2012 at US$ 86.21 per ton (basis 6322 GAR coal), which was US$ 1.56 Higher than August 2012 Price but US$ 30.05 lower compared to the same period in 2011.

- Umesh Shanmugam