Participants in the biggest Asian coal conference in Bali, Indonesia, in the first week of June will be eying whether China will continue to remain relatively passive in importing thermal coal, industry sources said Monday.
Participants in the Coaltrans Asia conference in Bali, Indonesia, to be held June 2-5 will also want to find out whether robust Indian demand for low-rank coal will be sustained.
A Singapore-based trader said that for the last six months Indonesian coal miners had been luckier than their counterparts in Australia and South Africa because Kalimantan prices, especially of sub-bituminous coals, held steady while Richards Bay and Newcastle bituminous coal prices fell.
"This current price support for Indonesian coals is coming from the Indian thermal coal buyers who are now aggressively buying low-rank coals," the trader said.
"Traders are convinced that the Indians are currently desperate to get anything from the market. The demand for power plants in India is the main driver for low rank coal," the trader said. He defined low-rank coal as material with a calorific value of 4,700 kcal/kg gross as received or below.
Traders said Indonesian low rank coals are scarce because traders have taken a long position expecting that the Indians will eventually buy everything, the Singapore-based trader said.
"At the Bali conference, I think more discussions will be focused on whether the Chinese will continue to remain passive in the import market because anything that China buys or not has a significant bearing on coal prices," the trader said.
A second trader said there would be exchange of ideas on whether China would implement a proposal to outlaw imports of some grades of lower calorific value thermal coal.
Market sources have said Indonesia is so far the largest producer and export of lower calorific value thermal coal to the Chinese market, supplying about 50 million mt of sub-bituminous grades most of which are classified by China as lignite.
The first trader said market participants would want to know how Indonesia would react to the proposed import ban and whether the Indonesian authorities would re-introduce a shelved proposal to ban the export of low- rank coals.
A third trader said there would also be discussion at the Bali conference about how to reduce the current gap in price expectations between offers for Indonesian sub-bituminous coals and bids for such material.
Although there is massive Indian demand for low-rank Indonesian coal which has supported Kalimantan prices, market participants will be curious to know whether this support will unravel once India enters the monsoon season in June and more Indonesian coal becomes available as the rains subside in Kalimantan and Sumatra.
"For the past five months, Indonesian coal producers stood firm on their prices because supply is scarce. The demand for low-rank coal is there. There were problems associated with South Kalimantan illegal coal miners which prevented between 800,000-1 million mt of coal from being sold monthly. And the rains in Indonesia presented a logistics problems," the first trader said.
"But from June onwards the weather in Indonesia will improve. The frequency of rainfall will be less. The issue of illegal miners is being resolved. There will be more coal available. How will Indonesian coal prices hold up? That is a question that people will want answers to," the first trader said.
"All this will be discussed by market players. But the main discussion will be if China's appetite for imported coal will remain staid and how long India will aggressively buy Indonesian coal," the first trader said.
