Imported coal prices firm up on lower output, higher demand

After a lull of nearly two years, prices of imported coal have started firming up again on lower production and improved demand.

Indonesia has set its July HBA thermal coal price 2 per cent higher than June, says a Platts report. HBA is the Indonesian price index, which is linked to major global coal indexes.

The hike is due to both higher demand from domestic power generators and closure in mining operations due to low realisation. In China, the world’s largest coal producer and consumer, the Bohai-Rim Steam-Coal Price Index has increased to a nine-month high of 401 yuan ($60.25) per tonne since June 8, the Shanghai Daily reports, quoting the National Energy Administration.

According to Linus Lobo, marketing manager of the Indian arm of US-based Xcoal, prices of most imported 4,200 calorific value (GAR) Indonesian fuel have gone up from as little as $22 to $27.5 a tonne on a FoB (freight on board basis) over six months. “Prices have been firm, particularly for the last three weeks,” he says.

The high calorific value South African coal popular with cement and sponge iron makers has become costlier. During the lull, South African producers entered long-term deals, offering discounts on the index to consumers. But the index has firmed up substantially over the last month, riding on improved European demand and alleged cartelisation. The FoB value of cargos (6,000 NAR) from the Richards Bay terminal has risen 14 per cent since late May to $57.70 a tonne.

The landed cost at Indian ports is $64 a tonne if transferred on large Cape-size vessels, says another trader. The freight element will be higher for smaller vessels. The firming up of South African prices saw a shift in demand for fuel from Mozambique, Colombia and the Russian East coast. There were also some supplies from the US for a brief period.

However, a rebel attack on the rail link to Beira port in Mozambique saw many consignments cancelled in June. The Colombian coal price firmed up in June (due to European demand), making it uncompetitive in Indian market.

Russian coal is enjoying a clear $4-5 a tonne advantage in landed cost over South Africa but only if transferred in Cape-size vessels, which can anchor only in a few ports, thereby restricting demand. The rise in coal prices is working in favour of petroleum coke, which is now widely used by cement makers both for power generation and cement production.

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