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A slight recovery in prices of Indonesian thermal coal is expected once Jakarta's new export licensing regime takes effect on October 1 and after India's Supreme Court this week cancelled around 200 coal mining permits, Platts, a McGraw Hill Financial group company providing market information, said in a statement.
Early this week the Supreme Court scrapped allocations of 204 coal blocks awarded over the last two decades. The development is likely to lead to consumers increasing imports once they stop getting coal from scrapped blocks. This development is seen as a potentially bullish demand factor in the international coal market.
Indonesia, which has huge coal stocks and is one of the largest suppliers in the international market, is facing a situation of illegal coal mining and the country plans to regulate exports.
"The export licence regulation is really a big problem as the market is still unclear about it," Platts said.
The new licensing regime for coal exports is likely to lead to firm prices as it will possibly block a number of illegal mining operations in Indonesian coal fields, thereby reducing available supply for export.
"Once the supply tightens, prices are sure to get better," a trader based in Indonesia said. The trader said a majority of Indonesian miners with export licences were producers of 4,200 kcal/kg GAR and higher-grade coal. At present, he said he knew of 36 companies that had secured export licences, and he had received news that another 15 companies had been granted permits, said Platts.
With around 51 companies all set for the new licensing regime from October, he expressed doubt that the government would consider postponing the implementation date a second time after it did it once in August.
An India-based trader said there was considerable market speculation on "what will happen after the October 1 deadline," and that Indian buyers were still quoting low prices.
For instance, while Indian buyers were bidding around $50/mt FOB for single-mine, low sulfur cargoes of 5,000 kcal/kg GAR Kalimantan coal, offer prices had risen to around $54-55/mt FOB.
A second India-based trader gave an uncertain reaction to the court ruling saying, "We are observing the market for a clearer picture."
October-loading Supramax cargoes of Indonesian 3,800 kcal/kg GAR coal were offered at $29.50/mt FOB levels, he said.
"There are some offers, but suppliers are not very aggressive as they expect prices to move up post the implementation of the licence regulation in Indonesia," the trader said.
A third India-based trader said he had sold a Supramax cargo of 4,200 kcal/kg GAR Indonesian coal at $37/mt FOB for October loading, and he was now offering a similar cargo at $38/mt FOB.
Prices have gone up and they might move up further after October 1. Some traders were holding back their cargoes in expectation of a price rise in the coming days.
The trader detected a shortage of 5,000 kcal/kg GAR cargoes and he pegged the price on a geared vessel basis around $52-53/mt FOB for blended material.
He said 5,900 kcal/kg GAR Indonesian coal was priced around $62-63/mt FOB, but there were limited buyers in India for this type and grade.
Platts assessed the daily 90-day prices for FOB Kalimantan 5,000 kcal/kg GAR coal at $50.60/mt, up 20 cents from Wednesday, and FOB Kalimantan 5,900 kcal/kg GAR coal at $63.60/mt, up 10 cents.
Platts assessed the price of FOB Kalimantan 4,200 kcal/kg GAR coal at $37/mt and FOB Kalimantan 3,800 kcal/kg GAR at $30.50/mt, both up 20 cents on the day.
