UPDATE 1-Indian buyers ditch Indonesian coal orders on rupee slump-trade
* 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 (Recasts, adds quotes from Indian trade sources)
By Fergus Jensen and Malini Menon
JAKARTA/NEW DELHI, Sept 10 (Reuters) - 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, Indian and Indonesian industry and trade sources 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.
The slide in Indian imports could help to narrow the gap between Indonesian coal prices and other regional coal indexes that have fallen faster under the weight of global oversupply.
LISTED FIRMS IMPACTED
Sjahrir said several of the firms affected were publicly listed, declining to identify 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 to 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 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."
SCARED TO ORDER
India's currency volatility has prompted coal importers to renegotiate deals besides delaying shipments or purchases, four traders said.
Even though the rupee appears to have bottomed at a record low of 68.85 on Aug. 28, volatility in the currency is offering little comfort to coal importers.
"People are scared to place orders because of the rupee volatility. So they have scaled back for now. I think they will be psychologically comfortable at around 60-61 (rupees to the dollar), if it settles down," said a coal market participant, who did not wish to be identified.
A trader said on condition of anonymity: "We have deferred on mutual agreement a few shipments, but we have not cancelled anything."
He added that cancellations could become widespread if the currency volatility continued.
PRICE AND QUALITY
The changing value of the rupee meant Indian buyers would now seek lower-quality coal from Indonesia, said Singapore-based Zenny Tran, coal team leader at Ginga Petroleum.
Even though the prices of South African and Australian coal have softened, Indonesian coal has been steady as suppliers have been "holding the prices", one coal trader said.
However, "Indonesian prices should go down" given the higher production and lower demand, he said.
"Price is the major criterion. People are willing to settle ... for lower GCVs (gross calorific values). But it all depends on how much reduction in prices one gets," the first trader said.
GCV is a measure of the heat or energy released by burning a kilogramme of coal. The higher the GCV, the more energy released.
Coal at 4,200 GCV is the most liquid grade now, the traders said. A trader said 3,200 GCV coal was also quite popular.
A fall in imports for India could exacerbate the country's power shortages. Coal fuels more than half of India's total power generation.
Thermal coal shipments to India were 12.02 million tonnes in June, up 52.5 percent year-on-year, data obtained by Reuters showed last month, as traders and power utilities stocked up to get through the monsoon season.
(Editing by Simon Webb and Muralikumar Anantharaman)
- Tweet this
- Share this
- Digg this
- Scots spurn independence but impatient for new powers
- UPDATE 1-Microsoft lays off 2,100, axes Silicon Valley research
- Eight bodies found after attack on Guinea Ebola education team
- Obama nominates Indian-American as ambassador to India
- China not warlike, says Xi, as border standoff dominates India trip
Scotland has chosen to stay in the United Kingdom, spurning independence in a historic referendum that had worried allies and investors, results showed on Friday with more than two thirds of the vote declared. Full Article
Obama to nominate Indian-American Richard Verma as India ambassador - congressional source. Full Article