Fitch: APAC Thermal coal prices to ease on end of Indonesia export ban

16 Feb 2022 , 10:06 AM

APAC thermal coal prices are likely to come under pressure in the near term due to seasonally weaker demand and the lifting of a ban on coal exports in Indonesia, Fitch Ratings says.

The Indonesian government’s ban on coal exports in January 2022 sent the benchmark Newcastle 6,000kcal/kg grade coal price to USD249/tonne by end-January, after it fell to USD166/tonne at the end of 2021 when tight supply in China eased. Power consumption in major Asian economies has been stabilising in recent months.

China’s benchmark Qinhuangdao 5,500kcal/kg price decreased to CNY800/tonne by end-2021 after the government took steps to boost production before rebounding to CNY1,010/tonne by end-January 2022. Domestic coal output rose by 7.4% yoy and 13.1% qoq in Q421, driving full-year production up 4.7%. Thermal power generation was steady yoy in Q421. Coal inventories at power plants are back to high levels compared with previous levels.

Fitch expects 2022 earnings for Indonesian miners to be minimally affected by the temporary export ban, but the ban highlights the continued regulatory uncertainty. The Indonesian 4,200kcal index continued to remain strong at above USD60/tonne in January 2022 as the Indonesian government’s unexpected ban on exports disrupted supply.

India’s rising domestic coal production and prioritisation of coal to the power sector has helped ease the coal supply crunch in September and October 2021. The coal dispatch to the power sector increased by 26% yoy to 184 million tonnes (mt) during Q421 while total coal production grew by 9% yoy to 207mt during the same period. We expect domestic coal production to continue to rise gradually in 2022. The moderation in coal prices and economic growth could drive up coal import volumes modestly during the year.