(Inserts dropped words "to India" in paragraph 12)
* India buys a fifth of Indonesia's coal exports
* Adds to global coal oversupply putting pressure on prices
* Indian buyers expected to seek lower-quality coal
By Fergus Jensen
JAKARTA, Sept 10 Indian buyers have reduced
shipments from top thermal coal exporter Indonesia and are
seeking to renegotiate contracts as a sharply lower rupee has
driven up their import costs, Indonesian industry executives
said on Tuesday.
The fall in purchases from India is forcing Indonesian
suppliers to seek other buyers or dump cargoes into the spot
market, putting more pressure on international benchmark prices
that are already near their lowest in four years.
India buys about a fifth of Indonesia's exports of coal,
which is traded internationally in U.S. dollars. Southeast
Asia's biggest economy aims to ship about 317 million tonnes of
its expected output of around 400 million tonnes this year,
according to government and industry sources.
Several Indonesian companies have scrambled to find new
buyers on the spot market after deals with Indian buyers fell
through, the Indonesian Coal Mining Association (ICMA) said.
"Some buyers have cancelled contracts or sought to
renegotiate contracts, because now it's actually cheaper for
them than fulfilling their obligations," ICMA commercial
committee chairman Pandu Sjahrir told Reuters.
"Sellers have been dumping into the market. They have to
choose - should I take (buyers) to court or renegotiate with
them or just sell it in the spot market?"
The ICMA official did not give the volumes impacted by the
Indian buyers' moves and those could not be immediately
ascertained by Reuters.
The rupee has lost 18 percent against the dollar
since May and the country is going through its worst economic
slump in 20 years. Energy imports are among the top contributors
to India's growing current account deficit.
India's power producers depend on coal to supply more than
half of the country's domestic power needs.
The slide in Indian imports could help to narrow the gap
between Indonesian coal prices and other regional coal indexes
which have fallen faster under the weight of a global oversupply
LISTED FIRMS IMPACTED
Sjahrir said several of the firms affected were publicly
listed companies, declining to name them because of the
sensitivity of the matter.
Indonesia's publicly listed coal companies export between 2
million and 7 million tonnes of coal a year each to India, he
said, adding that the increase in spot market supply had
weakened prices for the past two-three weeks.
Listed Indonesian coal mining companies that export coal to
India include Bumi Resources, Adaro Energy,
Indo Tambangraya Megah (Banpu Indonesia) and
state-owned Bukit Asam.
Indonesia ships around $2 billion worth of coal a month, one
of its largest exports by value. A drop in exports would
exacerbate Indonesia's own current account deficit, which is
already a concern for investors as it fights a weakening rupiah
, rising inflation and the exit of foreign capital.
"Deals are still being done," said Ben Lawson, chief
development officer at Indonesian coal producer Apple Coal,
referring to Indian purchases of Indonesian coal. "(But) many
contracts are being renegotiated or delayed."
INDIA'S POWER SHORTAGES
The changing value of the rupee meant Indian buyers would
now be forced to import lower quality coal from Indonesia than
they were buying before, said Singapore-based Zenny Tran, coal
team leader at Ginga Petroleum.
A fall in imports for India could exacerbate the country's
"It is unlikely that Indian power companies can continue to
pay for Indonesian coal at today's prices without causing
themselves serious financial harm," said Roleva Energy coal
analyst Bart Lucarelli. "Power shortages are a way of life in
India and I think we will see more of them over the next year."
Last year, 670 million people in the northern, eastern and
northwestern parts of the country had no power for two days, the
biggest outage in the world, as a few states drew excess power
from the national grid causing it to snap.
China's appetite for Indonesian coal has also subsided as
domestic producers slash prices to gain market share. China's
spot coal prices are down 14 percent this year and 9.3 percent
since June, hitting a four-year low of 546 yuan per tonne last
Indonesian coal exporters have seen revenues plummet with
international prices, and asked the government on Monday to help
them by delaying plans to hike royalty and tax on coal output.
The Indian rupee rose to a two-week high at 64.15 in early
trade, versus its Friday close of 65.24/25. The rupiah dropped
almost 3 percent on Tuesday, hitting a near four-and-a-half-year
low with spot indicative rupiah reaching 11,490 per dollar, its
lowest since April 2009.
(Editing by Simon Webb and Muralikumar Anantharaman)