Subdued demand & global oversupply pushed down this month's HBA
COALspot.com: The Indonesia Coal Price Reference for the month of September Dives To 11-Year Low, hitting its lowest levels in history and highlighting the plummeting demand for the coal around the world.
The Ministry of Energy and Mineral Resources of the Republic of Indonesia revised down the benchmark price of Indonesian thermal coal in September 2020 loading by US$ 0.92 per ton compared to August 2020.
The Coal Price Reference (HBA) for September 2020, down by 1.83% month over month to US$ 49.42 per ton for 6322 GAR power plant coal for September 2020 delivery for exports as well as for domestic end-users including for Indonesian power plant operators.
The declared Indonesian thermal coal price reference for September 2020 delivery is 24.88% lower compared to September 2019 price. September 2020 HBA hitting its lowest levels in history of HBA.
An increase or decrease in four coal indices such as Indonesia Coal Index (ICI), Platts-5900, Newcastle Export Index (NEX) and Global coal Newcastle Index (GCNC) will cause an increase or decrease in Indonesian coal price reference every month, as HBA is linked to those coal indices.
The coal price reference in Indonesia was established to fulfill the requirement of mining Law 04/2009 and ministerial decree No.17/2010. In addition to that, it aims to increase government revenue from royalties from coal producers.
The declared Indonesia thermal coal reference price (or called HBA) for September 2020 was the lowest in 141 months or since launching of HBA by the government of Indonesia. The royalties and taxes will be calculated based on this declared HPB. Interestingly, the highest monthly average price occurred in February 2011, while the lowest coal price occurred in September 2020. The September 2020 HBA is 61.10% lower than the February 2011 price.
Indonesian coal benchmark price for September 2020 was calculated based on calorific value of 6,322 kcal/kg (GAR), stated to be using a formula based on the August 2020 index average of ICI-1 (Indonesia Coal Index) 25%, Platts-5900 25%, NEX (Newcastle Export Index) 25%, and GC (globalCoal Index) 25% and its was calculated considering coal with GCV (GAR) 6,322 kcal/kg, Total Moisture (arb) 8.00%, Total Sulphur 0.8% (arb), Ash Content 15 % (arb) and delivery free on Board (FOB) Vessel basis and apply to spot contract, delivery between 1 – 30 September 2020 or until publish an new Coal Price Reference (HBA).
The highest benchmark price was declared by the Ministry of Energy & Mineral Resources of Indonesia in February 2011, and this month’s declared price is around US$ 77.63 a ton lower compared to Feb’ 11 benchmark price. In the meantime, this month’s declared price was the lowest price ever declared by MEMR.
The government of Indonesia was publishing a monthly coal price reference (HBA & HPB) since February 2009 to be used by coal producers for all spot as well as term contracts.
However, the official implementation of HBA was commenced since September 2011 and according to government regulation, the coal benchmark price must be used by the holders of production operation IUPs, special production operation IUP's, and CCoWs as a reference in determining the coal selling price for a particular period.
The declared HBA in this month is valid for the spot price (loading on or before 30 September 2020 or until issuing an new HBA), while (as per previous HBA note) as for term price (up to 12 months’ supply), the average reference price (HPB) of the previous three months will be used to determine the selling price. (A 50 per cent of latest month's HPB (the current month), a 30% one-month prior HPB and a 20% of two-month prior HPB).
The government used to declare the price marker for eight brands of Indonesia's coal, which were most commonly traded in the market. Those eight brands act as the benchmark and used to calculate other 69 coal types with a quality similar to the coal price markers. However this time, the government was issued price for HBA and no HPB prices was published.
COALspot.com, used its own calculator which is developed based on HBA/HPB formula and terms and condition declared by DGoMC to calculate HPB prices for eight major brands and for other types of coals. The government has stopped declaring formulas or methodologies that used to calculate either HBA or HPB. COALspot.com now publishing HPB and other coal prices based on US$ 49.42 for the basis 6322 GAR coal.
Click here for details of Indonesian coal price reference since January 2009.(cs).
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