Countries in the region European Union reported to have begun to despair in the face of energy crisis that happened. Coal was again an option as gas prices soared due to tight supply amid rising demand ahead of winter.
Citing reports Fengkuang Coal Logistics, due to the high price of natural gas, European power producers have asked for Indonesian coal supply for purchase in the fourth quarter of this year. One of the countries reported to be interested in importing coal from Indonesia is Italy.
In 2018 Indonesia exported 6 million tons of 4,200 kcal low-calorie coal to Europe, but due to emissions considerations, export volumes were significantly reduced. So far, the main supply of coal in this region comes from Russia and Colombia. However, supply from these two countries has also faltered due to high demand.
“Surprisingly, Europe is again considering Indonesian coal for purchases in November and December because natural gas prices are predicted to rise drastically,” the report said. Fengkuang Coal Logistics, quoted Thursday (7/10).
But Europe has to compete with Britain, India, China, and several other Asian countries. On the other hand, the price of coal is also getting higher following the high demand. Check out the following databox:
On Wednesday (6/10), the price of ICE Newcastle coal for delivery in December 2021 even touched US$ 267 per ton. Then for October delivery at the level of US$ 235, and November delivery at US$ 225 per ton.
According to data from Platts, Indonesia’s thermal coal supply has tightened in line with high demand from China. So the price shot up to US$ 102.5 per tonne for 4,200 kcal of coal, and US$ 75.5 for 3,800 kcal of coal. Meanwhile, medium calorie coal costs US$ 166.5 per ton.
European buyers are reportedly willing to pay more than that price, but are constrained by supply constraints. Although coal mines in Indonesia have recovered from the heavy rains and floods that hit in early September, the rainy season is still a major constraint in increasing production. Manufacturers are also reportedly delaying shipments.
“Because energy consumption will soon peak in winter, the shortage of coal supply cannot be overcome in the short term. This is a dilemma that must be overcome by power producers who own coal-fired power plants (PLTU),” the report said.
Meanwhile, the surge in coal prices triggered by increased demand boosted Indonesia’s coal exports, reducing the proportion of domestic market obligations (DMO). According to Statista data, as of September this year, the DMO fulfillment ratio was only 46.16%, the lowest level since 2017.
Then as demand came in from China, most of the producer’s coal inventories were sold out and prices increased. The FOB price of 4,200 kcal Indonesian coal shipped by Supramaxes in October was US$ 112-120 per tonne, an increase of US$ 20-24 tons from last week.
Although purchases from several other Asian countries such as Thailand, Vietnam, and Bangladesh, which previously purchased low and medium calorie coal were held back by high prices.
As Indonesia’s supply is still limited, some Asian buyers are also increasing their coal purchases from Russia and South Africa. Some of the coal rejected by Chinese buyers because of excessive trace elements flows to Pakistan, India and South Korea.
RI Coal Producers Difficulty Boosting Production
In the midst of soaring coal prices in the international market, Indonesia has difficulty increasing production because the rainy season has started. The high rainfall in the mining operation area is a major constraint to production. Slowing production in the end boosted prices.
“Domestic weather is a major challenge for operations. Rainfall is quite high in several areas in South Kalimantan and East Kalimantan,” said General Manager Legal & External Affairs of PT Arutmin Indonesia Ezra Sibarani. Check out the following databox:
Ezra said Arutmin Indonesia would optimize mining operations in the field. Especially in meeting the supply of coal for PT PLN’s power plant. “We have passed the DMO. In addition, we will continue to fulfill our contractual commitments to overseas customers,” he said.
Meanwhile, Adaro Energy is optimistic that the prospect of the coal business in the second half of this year will be bright. Adaro’s Head of Corporate Communication Febriati Nadira said Adaro Energy will maximize efforts to continue to focus on operational excellence in its core business.
“Adaro will continue to follow market developments by continuing to carry out operations as planned at the company’s mines while continuing to focus on maintaining healthy margins and continuity of supply to customers,” he said.
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