Imported thermal coal prices may soften from October

Imported thermal coal prices are likely to soften from October as China is expected to reduce imports, which will lower fuel costs for coastal power plants, including those run by the Essar, Tata and Adani groups.

Imported coal prices have risen in recent months because China increased imports while production in Indonesia declined due to incessant rains. “We expect rising coal prices to plateau in August and then start to dip from October,” a senior executive at a coastal plant said.

Sector experts said Chinese policies have had a significant impact on prices in the past year. “In June, the Chinese government allowed its mines to produce an additional 200 million tonnes for the entire year. This additional production is expected to hit the market after September, just in time for the winter restocking period for utilities. This would put downward pressure on imported coal prices as more utilities opt to buy domestic material,” said Deepak Kannan of S&P Global Platts.

Hydel generation in China has been below expectations so far this year, which has raised demand for thermal coal but the situation is expected to change in the weeks ahead, which would impact coal prices, he said. Thermal coal prices have risen this year due to tight supplies at various coal producing regions. The Indonesian government’s coal reference price, known as HBA or Harga Batubara Acuan, surged 44 per cent on year in July to $83.97/mt, a seven month high.