ICMA WEBSITES – EDITORIAL (7 AUGUST 2020)
Price Downturn Trend Continues in August
The Ministry of Energy and Mineral Resources (MoEMR) has issued the Coal Price Reference (HBA) for the Month of August which shows the trend of declining. HBA August recorded at US$ 50.35/ton which 3,49% lower than the previous month HBA. This price is as the same level with the HBA on February 2016 which considered as the lowest in the decade. Amidst the Pandemic Covid-19 with more uncertainty still lingering in the future, there is a growing concern that the trend of declining of the commodity price might continue.
The pricedown turn trend has actually seen since August 2018 whereby oversupply in the global thermal coal market was wider. Weak demand of import coal in the second half of the 2018 was exacerbated by the growing tension of the trade war between the US and China. The slowing down of the Chinese economy impacted import of coal in the World’s second biggest economy. The tension which spilled over affecting economic relation between China and Australia also played some part in bringing down Newcastle and Global Index in 2018. On the other hand, in term of supply, Indonesian coal production in 2019 recorded the highest total production in years. This further pushed the price down turn which continue in 2019.
Actually, coal industry expected the price rebound in the year 2020 as the World’s economy was predicted to recover. Unfortunately, the unexpected Pandemic Covid-19 changed the whole game. The already weak energy demand worsened by the Covid-19. The lockdown policy implemented in China in the early 2020 and India in March until June triggered down the coal demand. Meanwhile, coal supply from Indonesia and Australia albeit the country are stil struggling to contain the virus the coal output is relatively strong. Indonesia government targets the national coal production in 2020 to achieve 550 million tone. With the 1st semester data it appears that number will be achieved. However with the demand still weak, there is a huge concern that the price is likely to decline in the next months. Therefore APBI-ICMA has issued a statement urging coal producers to cut their outputs in order to balance the oversupply condition in the global thermal coal market.