Asia-Pacific coal prices to moderate as Indonesia’s export ban lifts: Fitch

ASIA-PACIFIC (APAC) coal prices are expected to moderate in 2022 as the Indonesian government lifts the coal export ban, Fitch said.

The ban on coal exports in January 2022 has led to a rebound in APAC thermal coal prices but it will be short-lived, the research house said.

In a report released on Feb 14, Fitch Ratings said it expects more pressure on coal prices in the near term on the back of seasonally weaker demand and the lifting of restrictions in Indonesia.

Fitch noted that the Indonesian 4,200kcal index continued to remain strong at above US$60/tonne in January 2022 but has still moderated from the all-time high of above US$100/tonne in October 2021.

Fitch believes that the temporary export ban will only affect Indonesian miners minimally as it was short-lived and progressively lifted within the month.

However, the agency’s research team is of the opinion that the ban highlights regulatory uncertainty for the sector.

According to Reuters, the suspension of coal exports was announced due to the critically low inventory of the fuel at domestic power plants. The ban remained in place for miners who did not reach domestic sales requirements.

Fitch highlighted that domestic supply was an issue because of the wet weather in Q4 2021 which affected production. With high coal prices in 2021 and increase in production quota, small and medium coal miners also focused on exports which reduced supply to domestic power plants.

Additionally, coal production in China, India and Japan has grown in 2021 and domestic coal production should continue to rise gradually in 2022, the report stated.

China’s market is expected to rebalance with the steady thermal power generation in Q4 2021 and with coal inventories at power plants returning to high levels compared with previous levels.

Fitch’s team also observed that India’s rising domestic coal production and prioritisation of coal to the power sector has helped ease the coal supply crunch in the country over September and October 2021.