* 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 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
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
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
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
GCV is a measure of the heat or energy released by burning a
kilogramme of coal. The higher the GCV, the more energy
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
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)