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No Gain From Rain for Indonesia Coal on China Demand Cools: Energy Markets
By Ben Sharples and Yoga Rusmana - Aug 6, 2010 9:55 AM GMT+0700
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China’s coal purchases are falling as Premier Wen Jiabao implements measures to
cut pollution from power plants that run on fossil fuels while putting curbs on
bank lending to prevent economic growth from fanning inflation. Photographer:
Nelson Ching/Bloomberg
The heaviest rainfall in seven years in Indonesia, the world’s second-biggest
coal exporter, is failing to stoke price gains as Chinese demand cools.
The price of coal leaving the port of Newcastle in Australia, the benchmark
gauge for Asia, has dropped 1.3 percent this year, according to IHS McCloskey,
a
Petersfield, U.K.-based provider of coal data. Last year, it rose 8.5 percent.
Indonesian coal mining companies said they may struggle to meet annual targets
as the Jakarta-based Meteorology, Climatology and Geophysics Agency forecasts
11.8 inches (300 millimeters) of rain may fall this month in Kalimantan, the
largest producing region. That hasn’t helped prices as China’s imports may
slide
27 percent to the lowest level in more than a year in the second half, a
Bloomberg News survey showed Aug. 3.
“China’s thermal imports have actually declined in recent months, as its
domestic production has lifted,” said Tom Price, a commodity analyst at UBS AG
in Sydney. “A stable seaborne price suggests that this bearish event is being
almost perfectly offset by the decline in supply from Indonesia.”
Coal more than doubled to a record high of $192.50 a metric ton in the first
seven months of 2008 partly as flooding in Australia’s Queensland state curbed
supplies. China’s coal imports in 2007 were 53 percent higher than those in
2005, while exports dropped 13 percent, according to customs data.
Newcastle prices dropped 1 percent to $95.20 a ton in the seven days ended July
30, compared with $96.45 in the first week in January, IHS McCloskey data
showed. Coal hasn’t fluctuated more than $15 a ton this year, compared with $26
in 2009, $117 in 2008 and $41 in 2007.
China Cutback
China’s coal purchases are falling as Premier Wen Jiabao implements measures to
cut pollution from power plants that run on fossil fuels while putting curbs on
bank lending to prevent economic growth from fanning inflation.
Imports may drop to 59.5 million tons, or 9.9 million tons a month, from 81
million tons in the first six months of the year, according to Bloomberg’s
survey of four analysts and industry officials. The monthly forecast would be
the smallest level of imports since May last year.
PT Adaro Energy, Indonesia’s second-largest coal producer, said on Aug. 2 it
may
fail to reach its annual production target of 45 million tons if the
“unprecedented” rainfall continues.
PT Bayan Resources, controlled by billionaire Low Tuck Kwong, said July 27 that
its PT Wahana Baratama Mining unit had notified customers it will miss
shipments. PT Bumi Resources, Indonesia’s largest producer, will maintain
supplies after starting the year with “a strategic opening inventory” of more
than 5 million tons, Dileep Srivastava, a company director, said yesterday.
Mining Flexibility
Bumi expects to achieve its 2010 output target of 67 million tons, even though
rain in Kalimantan has been “unusually heavy,” by using the flexibility
afforded
by having multiple mines, Srivastava said. If the wet weather abates from
September onwards, production levels may increase, he said.
Any shortage of coal from Indonesia can be offset by supplies from Australia,
the world’s biggest exporter of the fuel, according to Mark Pervan, head of
commodity research at Australia and New Zealand Banking Group Ltd. in Melbourne.
Port Waratah Coal Services, operator of two terminals at Newcastle, shipped
55.5
million tons in the seven months ended July 31, according to data on
its website. The terminals can handle 113 million tons a year. Capacity is
being
increased to about 163 million by the end of 2011.
“For Japan, China, Korea and Taiwan, Newcastle would probably be the most
logical option to cover cargoes,” Pervan said. “We are currently in a seasonal
lull in terms of coal demand, so the net impact may not be as apparent as it
would be during peak demand period.”
Coal shipped from Newcastle, the world’s largest export harbor for the
power-station fuel, declined 5.7 percent to 2.1 million tons in the seven days
to Aug. 2 compared with the previous week, according to Newcastle Port Corp.
To contact the reporters on this story: Ben Sharples in Melbourne
at [email protected];Yoga Rusmana in Jakarta at [email protected]
