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Not China, India is the Savior of Indonesian Coal

Volatile coal prices tend to weaken throughout September 2023. This condition has an impact on the value of Indonesian exports which fell by around 2.2% in

The overall performance of domestic coal exports in September was recorded as poor amidst price volatility. September’s export value was recorded at US$ 2.2 billion or around Rp. 34.91 trillion (US$ 1= Rp. 15,870). This value decreased by 2.19% compared to the previous month (month to month /mtm).

The price of bricks set a record high in four months on September 19 2023 at US$ 168.25 per ton. For almost half the first month, coal prices fluctuated in the price range of US$156-168 per ton. However, around the end of September, coal prices had to undergo a correction. Volatility throughout September was allegedly due to the spread of positive and negative sentiment.

Coal price movements in September were observed to be quite sideways, but a downward trend began to appear since September 26.

Coal Price Sentiment in September

The weakening of prices occurred because China, as the world’s largest coal producer, increased its coal production. This has a high impact, thereby reducing global demand.

Turning to India, this country’s new renewable energy sector is experiencing a boom. According to The Week, it is said that India is the world leader in new renewable energy (excluding hydropower) both in terms of total capacity and generation. By mid-2023, the country will have installed more than 130 GW of new renewable energy capacity, accounting for 30 percent of its total capacity.

Apart from that, coal prices are also influenced by movements in gas prices as a substitute commodity for coal which is lower in carbon. The problem of supply threats occurred with Australian liquefied natural gas (LNG), which was threatened by a labor strike.

However, at the end of September, companies and workers took a middle course which reduced the threat of LNG supplies and lowered energy commodity prices.

September Coal Rising Sentiment

The driving force in coal prices is still caused by a surge in demand ahead of the long holiday in China which will start on September 29. This long holiday will encourage the Bamboo Curtain Country to increase supplies in an effort to prevent supply shortages. Holidays will encourage increased demand, so that industry will maximize production capacity which will increase electricity demand.

Apart from that, India experiences an increase in coal use every year. India will add 25-30 gigawatts (GW) of thermal power plants in addition to the 49 GW of coal-based units under construction.

Apart from that, the sentiment of high demand ahead of various festivals in September also influenced India’s high demand. The increase in demand for Asian coal can also be seen from the world’s largest coal exporter.

The high demand for coal is caused by the Asian market experiencing an increase in energy requirements for the Asian textile industry which strengthens China’s needs which will face holidays and ahead of festivals in India.

The threat of uncertainty in the supply of energy sources due to a labor strike in Australia pushed coal prices to their highest point around mid-September. Gas supplies are threatened with disruption due to strikes at Wheatstone and Chevron’s West Australian LNG facilities.

The overall performance of domestic coal exports in September was recorded as poor amidst price volatility. September’s export value decreased 2.19% and fell 47% ( year on year /yoy) to US$ 2.2 billion or around Rp. 34.91 trillion.

The largest decline (yoy) was recorded by China, namely 44.4% ( month to month /mtm) and a collapse of 68.3% (yoy).
The decline was caused by peaking demand in August 2023 when the world was hit by hot temperatures due to heatwaves. This phenomenon also has an impact on hydropower disruption due to the drying up of water flows, so that the use of coal plants becomes more intensive.

The decline in exports was seen in China, Malaysia and Japan. However, India showed a jump in FOB values ​​in September.

The decline in export value also looks very serious, especially compared to a year ago. The main factor in this decline was due to the price of coal in September 2022 reaching US$450 per ton, while the price in September this year was only a third of that. Overall, the value of coal exports from January to September 2023 was recorded at  26.12 million tons, a decrease of 24.25% compared to the previous year.

By volume, coal exports were recorded at 30.42 million. Volume was 8.23% lower (yoy) but slightly up 2.76% (mtm). Overall, coal exports for the January-September period rose 1.4% to 273.8 million tons compared to the previous year (yoy).

The decline in coal prices causes miners to maximize the volume exported to maintain the company’s financial performance. Of course, a price reduction will significantly reduce net profit. However, the increase in volume is expected to maintain the company’s financial performance amidst falling prices.

India Becomes RI’s Savior.
The increase in exports is also visible on a monthly basis. One of the surprises in Indonesia’s coal exports in volume was seen in the destination countries of the Philippines and Bangladesh. These two countries show a surge in exports from Indonesia on a monthly and annual basis.

India will be the savior of Indonesia’s exports in September 2023, both in value and volume. In terms of value, India is the only five export destination countries whose export value and volume increases both monthly and annually.

India’s export value rose 12.38% (mtm) and jumped 45.5% (yoy) in September 2023 to US$ 635.5 million or Rp. 10.09 trillion. By volume, exports to India soared 54.7% (mtm) and flew 42.6% (yoy) in September to 11.39 million tons.

On the other hand, in value terms, exports to China fell 68.3% (mtm) and collapsed 44.4% (yoy) to US$ 300.4 million or Rp. 4.77 trillion. In terms of volume, exports to China collapsed 53.7% (mtm) and fell 38.4% (yoy) to 4.49 million tons.

Source : CNBC