(The opinions expressed here are those of the author, a columnist for Reuters.)
* GRAPHIC: Indonesia coal exports vs price: tmsnrt.rs/2yvX8lH
By Clyde Russell
LAUNCESTON, Australia, Oct 11 (Reuters) - Indonesia wants to export more coal in order to earn U.S. dollars to shore up its faltering currency, but the problem is buyers don’t seem to be hearing the message.
Indonesia’s coal exports dropped to 24.8 million tonnes in September, down 12.4 percent from August’s 28.3 million tonnes and 10 percent from 27.6 million tonnes in the same month last year, according to vessel-tracking and port data compiled by Refinitiv.
If the drop isn’t worrying enough, it comes even as the price of lower-grade Indonesian coal is at its widest discount to higher-quality Australian thermal coal.
Indonesia is planning to increase its 2018 output of coal to around 507 million tonnes, up from a previous target of 485 million tonnes. The aim is to convert the additional U.S. dollars from sales of the polluting fuel into rupiah, which has dropped about 12 percent so far this year against the U.S. currency.
In theory, importers should be keen to ramp up purchases of Indonesian coal, as the massive discount to Australian cargoes more than compensates for the lower energy value.
The price of thermal coal at Australia’s Newcastle port , as assessed by Argus Media, was $112.25 a tonne in the week ended Oct. 5.
Low-rank Indonesian coal, with an energy content of 4,200 kilocalories per kilogram (kcal/kg), was at $38.88 a tonne at the end of the same week, according to Argus.
This represents a discount of $73.37 a tonne - the widest on record, exceeding the $61.07 recorded in November 2016, according to the Argus data.
Even Indonesian coal with a similar energy content to Newcastle is trading at a fairly wide discount, with the Indonesian government’s reference price, known as the HBA COAL-HBA-ID, set at $100.89 a tonne for October.
The HBA is a composite price made up equally of the Platts Kalimantan 5,900 kcal/kg assessments, the Argus-Indonesia Coal Index for 6,500 kcal/kg, Newcastle Export Index of 6,322 kcal/kg and the globalCOAL Newcastle grade of 6,000 kcal/kg.
In effect, the HBA index sets the price for much of Indonesia’s thermal coal exports, and its discount to Newcastle should provide support for exports from the Southeast Asian nation.
Indonesia, the world’s largest exporter of thermal coal used in power stations, has two major customers, China and India, the planet’s two largest coal importers.
Chinese buyers mainly use Indonesian coal as a blending feedstock with domestic supplies, trading off a loss in energy value for lower sulphur and ash.
Indonesia’s exports to China are up strongly in the first nine months of the year, reaching 89.7 million tonnes, 18.8 percent above the level for the same period last year, according to the ship-tracking data.
However, much of this strength was in the first quarter of 2018, and September marked a third month of declining imports from Indonesia.
China imported 7.5 million tonnes from Indonesia in September, down sharply from August’s 9.7 million tonnes, making it the weakest month so far this year.
The news on India’s imports isn’t quite as bad for Indonesian exporters, with September’s 7.1 million tonnes down slightly from August’s 7.4 million tonnes.
However, for the first nine months of the year, India’s imports from Indonesia have been relatively flat, dropping fractionally to 57.8 million tonnes from 58.2 million in the same period in 2017.
What may be worrying for Indonesian coal exporters is that their rivals seem to be gaining on them in India, while they stand still.
India bought 12.5 million tonnes of coal from the United States in the January-September period, up 49 percent on the 8.4 million tonnes imported in the same period last year.
From South Africa, India imported 25.9 million tonnes in the first nine months of 2018, up 16 percent from 22.4 million tonnes in the same period a year ago.
Although the overwhelming majority of Australia’s coal exports to India are coking coal used in steel-making, it’s worth noting that these are also up in the first nine months of 2018, climbing to 34.7 million tonnes compared to 30.4 million tonnes in the same period last year.
What the numbers are showing is that Indonesia is likely to struggle to ramp up exports of its mainly low-rank thermal coal, as there doesn’t seem to be appetite among buyers, even though the discount to higher-grade fuel is as wide as it has ever been. (Editing by Kenneth Maxwell)