Indonesia has set its October coal benchmark price at a record high of $330.97 per tonne, as demand from Europe rises, its energy ministry said on Monday.

The monthly benchmark price in Indonesia, the world’s biggest thermal coal exporter, rose from $319.22 per tonne in September. It also broke the previous record of $323.91 per tonne in June.

“The reactivation of coal power plants in a number of European countries has contributed to the rise of global coal demand,” the ministry said in a statement.

Coal buyers all over Asia, and some from Europe, joined an industry conference on Indonesia’s Bali island late in September to hunt for any coal supply they can secure ahead of winter. Global supply shortages and growing energy security concerns have driven an unprecedented rebound in coal demand.

Western countries have sought to move away from the polluting fossil fuel to slash carbon emissions but demand for coal has surged as governments try to wean themselves off Russian energy while keeping a lid on power prices.

LONDON, May 12 (Reuters) – India’s distributed coal stocks remain critically low as the country struggles to produce and transport enough fuel to meet surging demand from power generators.

Power generators’ inventories are equivalent to just eight days worth of consumption compared with 16 days at the same point last year and before the pandemic.

In a normal year, distributed inventories increase over winter, when lower temperatures reduce electricity demand and generation, and the end of the monsoon permits greater coal production.

But stocks have remained persistently low at seven to nine days since August 2021 despite a government campaign to increase mine output and distribution.

Restocking has been dealt a further blow by a heatwave across the country over the last two months boosting air conditioning and refrigeration demand.

Power producers’ stocks are at the lowest pre-summer level for nine years, which will constrain generation and ensure blackouts continue (https://tmsnrt.rs/3sxkRyN).

LOGISTICS

Coal is the bulkiest of all commodities so supply depends as much on enough distribution capacity as it does on mine output.

Production increased by 26 million tonnes (9%) in the first four months of the year compared with the same period in 2021.

Distribution rose by 29 million tonnes (11%) over the same period, statistics prepared by the Ministry of Coal show.

At the same time, the government has ordered mines and the railway network to prioritize deliveries to power generators.

Coal despatched to the power sector increased by almost 39 million tonnes (18%) in the first four months of the year.

But the consequence has been a drop of 10 million tonnes (18%) in deliveries to industrial users, including the steel, cement and aluminium sectors.

In effect, the government has supported the supply of coal to electricity generators by worsening shortages in the rest of industry.

COAL TRAINS

In common with other countries in other periods, including Britain and China, the rail network has emerged as a major constraint on boosting coal supplies.

The total number of coal trains loaded and despatched every day in April 2022 was no higher than in April 2021, according to the Ministry of Coal.

The tripartite plan between the coal industry, railway and government called for an average of 336 trains a day to be loaded in April, but the system managed only 276, unchanged from April 2021.

Trains despatched to power producers increased by almost 18 per day (7%) compared with the same month a year earlier, but with the loss of 18 per day (56%) to all other users.

There may be scope to increase total delivery capacity by debottlenecking, increasing average train speeds and reducing dwell times at both pits and power stations to make more intensive use of the rolling stock.

In addition, the government has already intervened to reverse, at least partially, the normal prioritisation given to passenger trains over freight in a bid to move more coal faster.

Indian Railways has cancelled a slew of passenger services to make more track available (“Power-hungry India halts passenger trains to free up track to move coal,” Reuters, April 29).

Until more rail deliveries can be made, however, stocks are likely to stay under pressure and electricity generators will struggle to meet peak demand.

By John Kemp

Indonesia ordered coal miners to slash output after record production and exports from the world’s largest shipper last year weighed on prices and state revenue.

The government has set the production target at 550 million metric tons this year, 9.8% below the 610 million tons in 2019, Energy and Mineral Resources Minister Arifin Tasrif told reporters in Jakarta on Thursday. Domestic consumption of the fuel is seen jumping 12% to 155 million tons, he said.

The government has lowered its coal production target for this year to 480 million tons in an effort to stabilize the global coal price, an official has said.

Last year’s target was 485 million tons, 25 percent of which was allocated to the domestic market obligation (DMO).

Energy and Mineral Resources Ministry mineral and coal director general Bambang Gatot Ariyono said the government considered various factors before deciding on the figure, including the movement of the US dollar.

“The goal is to maintain a good coal price,” he said, adding that there were possibilities that the government might revise the production target this year.

“We will continue to oversee the situation. Usually, coal miners will revise their production target no later than July.”

One of the reasons to revise the target was to increase state revenue, he added.

Ministry data from up to Dec. 27 shows that Indonesia reached 94.02 percent of its annual total target for 2018.

Bambang assured that a 25 percent DMO policy and a coal price cap of US$70 per ton would ensure stable electricity tariffs until the year-end.

Global coal prices are expected to remain healthy throughout 2018 owing to stable demand from China and increasing consumption in India, says the World Coal Association (WCA).

WCA chief executive Benjamin Sporton projected that demand from China would continue to be reasonably strong this year, despite the country’s plan to implement a huge gasification program for households and industries to reduce its dependence on coal.

Furthermore, he said India would also increase its coal imports amid soaring demand from its power generation sector and lower-than-expected domestic production.

“India is not in a shortage situation, but it is running very closely behind it, and that’s really what has driven coal exports into India, and a good chunk of that is coming from Indonesia,” Benjamin told The Jakarta Post recently.

The price of Asian benchmark Newcastle thermal coal had climbed to US$106.78 per ton in January after falling to as low as $74.52 per ton in May last year.

“It’s really the supply constraint that sent the price to above $100 per ton over the last year, […] and I would still expect it to be somewhere in that ballpark for most of this year,” Benjamin said.

The Indonesian government has limited the country’s coal production in 2018 at a maximum level of 485 million tons, 25 percent of which will be allocated for the domestic market.

Within the first two months of 2017, Indonesia’s coal production reached 28.07 million tons, 15.6 million tons of which were absorbed by the domestic market.

The Energy and Mineral Resources Ministry says it will issue a regulation on the domestic price of coal to curb production costs as the government has decided not to increase electricity rates.

The ministry’s electricity price section head, Jisman Hutajulu, said in Jakarta on Monday that domestic coal would be sold based on domestic market obligation (DMO).

“The objective of introducing the regulation is help easing the financial burden of PLN,” Jisman said as reported by tempo.co, adding that the DMO was based on Energy and Mineral Resources Ministry Regulation No. 34/2009 on coal and mineral resources.

The regulation, among others, rules that the domestic price of the mineral and coal are based on the price reference of the commodity.

Under the regulation, the energy and mineral resources minister will decide the coal quota for domestic needs.

Jisman said Minister Ignasius Jonan would also revise a prevailing regulation to decide the domestic coal price after taking into account the opinions of stakeholders.

Jisman said PLN had proposed a price floor of US$60 and price ceiling of $70.

PLN previously said that rising coal prices had resulted in an increase of production costs, as around 57 percent of the company’s generated power came from coal-fired power plants.

Jakarta, Kompas – Futures contracts in coal trading transactions provides a price guarantee for industry players amid fluctuating commodity prices. Although quite profitable for sellers and buyers, futures contracts can make coal prices less competitive.

It was surfaced in Argus Coalindo Indonesia Coal Forum 2018, in Jakarta, Thursday (8/2). This gathering of coal industry players become a socialization event for futures contract concept in Indonesian Coal Index (ICI) for coal trading.

This was conveyed by PT Coalindo Energy CEO Maydin Sipayung. Coalindo Energy is the Indonesian Coal Index provider.

Maydin said, futures contracts become the agreed price of buyers and sellers of coal for a certain period. This changes the pricing system that has been set for a period of one year.

“The concept of futures contracts is applied because the selling and buying of coal is done in a long period of time. Because, the delivery time takes months. On the other hand the coal prices are very volatile, “he said.

Futures contract, Maydin continued, is a tools to determine the coal price for a certain period. Buyers and sellers get guaranteed prices.

Executive Director of the Indonesian Coal Mining Association (APBI) Hendra Sinadia assess, the implementation of futures contracts have a positive and negative impact. In general, the positive impact that buyers and sellers will experience is the guaranteed price.

“But, on the other hand, futures contracts make the selling price of coal has no competitiveness. When the coal prices are high, the producers cannot experience the benefit, “he said.

Head of Sub Directorate of Production and Marketing Operations Supervision, Directorate General of Mineral and Coal Ministry of Energy and Mineral Resources Hersonyo Wibowo said the coal production target this year is 485 million tons.

The Energy and Mineral Resources Ministry has announced that it will maintain the prices of electricity and certain fuel types in the first quarter of 2018, forcing state energy giants Pertamina and PLN to bear the burden of increasing oil and coal prices.

“The decision has been made to preserve people’s purchasing power,” Energy and Mineral Resources Minister Ignasius Jonan said during a media conference on Wednesday.

Subsequently, the prices of Premium gasoline, which has a research octane number (RON) of 88, and subsidized diesel fuel will be maintained at Rp 6,450 (49 US cents) and Rp 5,150 per liter, respectively. These rates have been in place since April 2016, even though the prices of global crude have been in an upward trend lately.

The price of global benchmark Brent crude reached $66.78 per barrel on Tuesday after falling to as low as $44.82 per barrel on June 21.

Meanwhile, the price of electricity for low capacity non-subsidized customers will remain unchanged at Rp 1,467.28 per kilowatt hour (kWh). Prices for mid-capacity and high-capacity will hover at Rp 1,114.7 and Rp 996.74 per kWh, respectively.

This is despite the 15.4 percent increase in the price of Asian benchmark Newcastle coal to $96.63 per ton between January and November.

Pertamina and PLN has pledged to undertake various efficiency measures to cope with the government’s decision to maintain current fuel and electricity prices.

Spot cargo prices for Australian Newcastle coal have risen nearly 15 percent from lows in late November after China loosened import restrictions to help meet a winter fuel shortage.

SINGAPORE: Asian benchmark thermal coalprices have pushed to their highest levels since 2016, fuelled by demand in China and loading delays in Indonesia that have ramped up shipping congestion outside major coal ports.

Spot cargo prices for Australian Newcastle coal have risen nearly 15 percent from lows in late November after China loosened import restrictions to help meet a winter fuel shortage.

“The reason behind relaxing the restrictions was to ensure coal supplies at utilities, as some coal-fired power plants in eastern regions have been operating with minimum coal inventories,” said Zhang Xiaojin, coal analyst at Everbright Futures.

The move by the National Energy Administration also followed an ambitious gasification programme that moved too many households and factories from coal to gas for its utilities to keep up. Traders said strong orders from India have also supported prices, which hit $105.65 per tonne on Wednesday, the highest since November 2016.

“India is buying throughout Q1, which means the shortage is not expected to end any time soon,” said a coal trader with a major trading house, who declined to be named.

HUGE CONGESTION

Bottlenecks at import terminals across China and delays at loading ports in Indonesia’s Kalimantan island, one of the world’s bigggest thermal coal mining regions have added to the tighter market.

“The trouble to load in Kalimantan is a result of huge rainfalls. This has triggered replacement orders for supplies from Newcastle (Australia), pushing up prices there,” said a second coal trader, speaking on condition of anonimity as he was not allowed to comment on trading activity.

The congestion started in late 2017, and is getting worse.

Shipping data in Thomson Reuters Eikon shows around 100 large dry-bulk ships waiting to load coal off the coast of Kalimantan, Indonesia, most of them at Samarinda and Taboneo.

Some ships have been waiting since late October, the data shows.

Even more ships are waiting to unload coal in China, where between 400 and 500 large dry-bulk carriers are waiting outside Shanghai/Ningbo and in the Gulf of Zhili, serving the ports of Tianjin, Coafeidian, Qinhuangdao and Bayuquan.

That’s up from around 300 ships waiting outside both Chinese and Australian ports to load or deliver in late 2017.

Analysts expect tight market conditions to last until the Chinese New Year, which starts in February.

“Congestion and supply-side delays have sent prices higher. We see seaborne coal price support for the winter through to the Chinese New Year, especially from China and India,” said Shirley Zhang, principal analyst for Asian coal markets at energy consultancy Wood Mackenzie.

However, in the longer term, prices should ease as China’s import curbs are potentially restored, heading to $69 a tonne by 2021 for Newcastle, Zhang said.

“In general, the Asian demand growth driver is shifting away from China towards India and Southeast Asia, including Vietnam,” she said, where strong demand growth would require investment into coal.