Indonesia Coal Mines Operate Below Cost as Price Drops, ANZ Says
As many as 10 percent of Indonesian coal producers are operating mines below cost after prices for the commodity slumped amid weaker Asian demand, according to Australia & New Zealand Banking Group Ltd.
“Small-medium companies producing low calorific value coal are thought to make up 60 to 70 percent of this group given they are typically most exposed to spot markets with their lack of scale and lack of long term contracts with buyers,” Mark Pervan, the head of commodity research at ANZ in Melbourne, said in a note today, without citing any producers.
Chinese traders in May asked to delay imports of Indonesian coal for as long as two weeks because supplies at China’s main ports were sufficient. The price for the power-station fuel at the Australian port of Newcastle has slumped 25 percent this year. Output has stopped from low quality mines in Indonesia since the Coaltrans Asia conference in Bali concluded earlier this month, Pervan said, citing anecdotal reports.
Swap contracts for the lower-quality fuel from Indonesia fell 3.9 percent while prices for shipments to China slid 1.1 percent, Ginga Petroleum Singapore Pte. said in an e-mail yesterday. Sub-bituminous coal with a heating value of 4,900 kilocalories a kilogram for loading in July dropped $2.50 to $61 a metric ton on a net as-received basis on June 19, the broker said. The third-quarter swap was 70 cents lower at $60.80.
Newcastle coal, the benchmark contract for Asia, declined $5.10, or 5.7 percent, to $83.75 a ton in the week ended June 15, according to IHS McCloskey, a Petersfield, UK-based provider of data. It was the lowest price since December 2009.