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Rising power demand in India fuelling June coal price rally, says Indonesia

Indonesia’s Ministry of Energy and Mineral Resources has said growing power consumption in India amid surging summer temperatures is one of the factors impacting coal prices, which rose by 17 per cent on a month-on-month basis in June.

“Higher electricity consumption in India due to the heat wave also boosted Indonesia’s coal demand. As a result, the reference coal price (HBA) in June rose 17 per cent, or $48.27 per tonne, to $323.91 a tonne from May,” the Indonesian ministry said. The statement was published in Bahasa Indonesia and translated to English using Google Translate.

“The Indian government has increased the number of coal imports due to tight supply from domestic producers for power plants,” Ministry of Energy and Mineral Resources’ Head of Communications, Public Information Services and Cooperation Bureau (KLIK), Agung Pribadi said. Besides India, prices were influenced by China. Another factor is the geopolitical situation in Europe due to the Russia-Ukraine conflict. The European Union has issued a policy to stop Russian coal imports effective from August and European buyers are actively seeking Asian coal supplies, he added.

Demand for coal

A senior executive from a State generation company (Genco) said, “Indonesian coal prices have been firming up due to increasing demand from India and Europe. Some Indian import tenders are expected to be inked in the coming week and it (Indonesia) is one of the countries”.

Besides, Australia is facing some friction on account of soaring gas prices which adds to costs. It may increase the use of coal for power generation as it is the cheaper source, the official explained.

Harga Batubara Acuan (HBA) has been rising since the beginning of 2022. In January, the prices were at $158.50 per tonne, rising to $188.38 in February, and then to $203.69 per tonne in March. They inched up further in April to $288.40, and then to $275.64 a tonne in May.

Coal imports

For FY23, India is expected to import around 59 million tonnes (mt) of coal for blending at power plants, while for June, the in-bound shipments are likely to be in the range of 4.8-5 mt.

Earlier this week, State-run miner Coal India (CIL) floated a global tender to import 2.42 mt of the key commodity for July-September of FY23. This was done within a week of receiving indents from seven State gencos and 19 independent power plants (IPPs). Overall, till July 2023, CIL has to import around 12 mt of coal.

Coal imports, which hit a peak of 248 mt in FY20, declined to 215 mt in FY21 and further to 209 mt in FY22. The decline in FY22 is largely due to a decline in imports by the power sector, which came down from 69 mt in FY20 to 45 mt in FY21 and then further south to 27 mt in FY22.

On May 18, the Power Ministry directed Gencos, including States and IPPs, to start importing by May 31 and if shipments do not arrive at power stations by June 15, the defaulter will have to increase imports to 15 per cent. Besides, if the blending of domestic and imported coal is not initiated by June 15, then domestic allocation of the defaulter will be reduced by 5 per cent.

Published on

June 12, 2022

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