Coal Prices Drop 7%, but Energy Crisis Continues…

Jakarta, CNBC Indonesia – Thermal Newcastle’s global benchmark coal price closed down 6.91 percent to US$ 241.35/ton. The downward trend that occurred this week was caused by the sharp increase in coal prices, which triggered profit-taking by the public trader on the futures stock or profit taking.

So far this week, Newcastle coal prices traded at a low of US$ 225.92/ton and a high of US$ 260/ton. However, in early October the price of coal touched its highest level of all time at the level of US$ 280/ton.

One of the triggers for the increase in coal prices is the energy crisis that hit various countries, from the US, Europe, to Asia.

Coal is widely used for power generation in various countries. However, in developed countries, energy mix policies that are more environmentally friendly have reduced the portion of coal use and shifted to natural gas.

Unfortunately, the high price of natural gas has forced utility companies, especially power plants, to switch to using coal again. An increase in demand for coal makes the price go up.

Toby Hassall, Analyst at Refinitiv, believes that the sharp increase in natural gas prices has supported the rise in coal prices.

Last Saturday, natural gas prices at Henry Hub (Oklahoma, United States) soared 2.78%. Since the end of 2020 (year-to-date), prices have skyrocketed by 122.92%.

When the price of natural gas rises, the cost of generating electricity with primary energy sources from this commodity will be more expensive. In Europe, the cost of generating electricity with natural gas on 12 October 2021 is EUR 85.22/MWh. Meanwhile with coal it is EUR 54.76/MWh.

The upward trend in world coal prices tends to benefit Indonesia as one of the largest global coal producers and exporters. Based on data from the Central Statistics Agency (BPS), exports of mineral fuels, which include coal, in the January – September 2021 period were recorded at US$ 21.54 billion or equivalent to 13.85% of the total non-oil and gas exports.

The increase in world coal prices also triggered an increase in the Reference Coal Price (HBA).

The Ministry of Energy and Mineral Resources (ESDM) has set the HBA for October 2021 at US$ 161.63/ton. This month’s HBA increased by US$ 11.6/ton compared to September 2021.

The Head of the Communication Bureau for public information services and cooperation at the Ministry of Energy and Mineral Resources, Agung Pribadi, explained that the increase in HBA was influenced by the increasing demand in China.

China, as the world’s largest coal consumer, is currently experiencing a supply crisis, at a time when its economy is improving which has pushed demand for electricity to increase. Moreover, towards the end of the year, the winter period will historically increase demand from the Panda Country.

In China, the benchmark Qinhuangdao coal price on the spot market rose 8.9% to RMB 1835/ton. This is evidence that the global supply crisis has raised global coal prices.

CNBC INDONESIA RESEARCH TEAM

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