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There's good news for import-dependent Indian coal consumers, especially the power producers.
Alongside a stronger rupee, a lower-than-anticipated demand from China seems to have softened coal prices in Indonesia during the past two weeks.
According to a prominent Kolkata-based trader, who did not want to be quoted, the global market for coal was expecting a strong demand from China soon after it entered the Dragon year (Chinese New Year of 2012) on January 23.
“Contrary to expectation, Chinese demand remained soft during the last two weeks,” he said.
The impact is reportedly evident on the coal market. As against the December price of nearly $45 a tonne (f.o.b.) for GCV 5300 kilocalorie a kg, Indonesian coal prices are now ruling at $42-43 a tonne.
Prices could have been softer, except supply disruptions in the archipelago due to heavy rains and the resulting logistics issues. The rise in crude prices may also have a role to play.
According to Mr Abhay Chaturvedi, Vice-President of Nagpur-based Gupta Coal (India) Ltd, in addition to supply-side constraints, strong Indian demand is providing due support to prices. “There is no sign of any slowdown in demand from India,” he said.
South Africa
Interestingly, unlike in Indonesia coal prices remained stable at $104-105 a tonne for GCV 6,500 kcal coal.
Indian traders argue that this is largely due to the international trading cartel holding up stock in the hope of revival of Chinese demand.
“This is a peculiar situation. While miners say they have already sold the February stock, no coal is available in the market place,” an Indian trader said.
Correction Due?
The Indian trading lobby, however, has a strong expectation of a major correction in coal prices.
According to a large-sized western-India based importer, catering to a number of power producers in the country, coal prices are headed for 15-20 per cent correction from the December level.
His views are supported by a Kolkata-based importer who is hopeful to witness another $2-3 a tonne slide in Indonesian prices and nearly a $15 a tonne fall in South African coal prices sooner or later.
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