This year’s commodity deflation has continued, causing one of Indonesia’s treasures, black gold, aka coal, to experience a weakening in price. The decline in the price of the ICE Europe Newcastle Coal Futures coal commodity over the past year until trading on Thursday (25/5/2023) has weakened -63.94% to US$ 140.50/ton.
The occurrence of this year’s commodity deflation is more to the decline in demand normally because the winter season is over. However, there are other macro factors that cause prices to fall, namely the pressure of recession risks that occur in Europe and the United States (US).
In addition, China, which is in the process of recovering its economy after easing its Covid-19 policy, has finally started to return to coal production independently. This could reduce potential demand from China, even though this bamboo curtain country is Indonesia’s largest commodity importer, including coal.
Russia is also rumored to be producing more coal for export to China, considering that the country provides incentives by cutting import tariffs to zero percent which makes export costs cheaper.
Bilateral relations between China and Australia are also reported to have started to improve with China’s decision to end the ban on Australian coal imports. Even so, the difference in calories and types of coal between Indonesia and the kangaroo country is quite a differentiator and has its own competitive advantage, so it shouldn’t have too much of an impact.
Sentiment from the country is still weighing down the rate of coal prices this year, but there is good news coming from Japan and India which have the potential to be the saviors of RI’s coal exports.
Good news for coal came from the two countries after the meeting of the G-7 group of countries because they failed to reach an agreement to determine firm steps to reduce fossil energy, even though most members wanted the use of fossil energy to be removed immediately.
However, Japan considers this step unfair because until now the use of fossil energy is still needed, this cherry country is the country most opposed to eliminating the use of coal. This is a positive catalyst for coal because demand from Japan will still exist.
India also stated that it would increase coal imports this year because electricity demand is expected to peak in June to reach 229 giga watts (GW), up from 215 GW in June last year.
The high demand for electricity in the midst of a heat wave in India has made Indonesia’s coal demand potentially increase to be exported there. Several Indonesian coal issuers will also benefit from the potential demand that will increase from Japan and India.
One of the beneficiaries is PT Bayan Resources Tbk (BYAN), it is known that until the first quarter of 2023 this issuer has exported to East Asia (Japan, China, Korea and Taiwan) increasing 96.51% on an annual basis (YoY) to US$ 349.83 million. Meanwhile, BYAN’s exports to South Asia (India, Bangladesh and Pakistan) increased from US$ 91.72 million to US$ 118.14 million.
Another issuer is PT Adaro Energy Tbk (ADRO), which exported US$ 249.91 million to Japan, an increase compared to the first three months of 2022 of US$ 130.81 million. Meanwhile, for exports to India, there was a decrease from US$ 202.44 million to US$ 185.27 million.
Furthermore, issuer PT Indo Tambangraya Megah Tbk (ITMG) is known to have exported US$ 169.18 million to Japan, an increase compared to the first quarter of 2022 of US$ 130.27 million. For Southeast Asia, ADRO exported US$ 219.30 million to India and Pakistan in the first three months of 2023, up 24.45% on an annual basis.
Then there is PT Bukit Asam Tbk (PTBA), a state-owned coal listed company which also recorded exports to India of IDR 2.07 trillion by the end of March 2023, up 46.01% compared to the same period the previous year.
Source : CNBC Indonesia