Bloomberg News

Indonesian Lower-Quality Coal Swaps Slide; China Contracts Fall

May 10, 2012

Swaps contracts fell for lower- quality thermal coal from Indonesia, the world’s biggest exporter of the fuel, according to Ginga Petroleum Singapore Pte Ltd., an energy broker. China prices also dropped.

The June 2012 contract for Indonesian coal with a heating value of 4,900 kilocalories a kilogram declined 85 cents to $74.65 a metric ton on a net as-received basis yesterday, according to data from the energy broker. Swaps for the third quarter of 2012 slid 55 cents to $74.25 a ton.

Swaps contracts for China coal dropped. Coal with a heating value of 5,500 kilocalories a kilogram on a net as-received basis for shipments to South China for June slid 65 cents to $98.10, Ginga said. The swap for the third quarter also fell 65 cents to $98.25 a ton.

A commodity swap is a financial agreement whereby a floating, or spot price, is exchanged for a fixed rate over a specified contract period.

About 60 percent of the coal from Indonesia is classed as sub-bituminous. The grade is typically softer, with a dull, earthy appearance, according to the London-based World Coal Association. Higher moisture levels and a lower carbon content reduce the heating value compared with grades with a higher quality stock. Sub-bit coal has kilocalories of less than 6,100 per kilogram, according to the Indonesian Energy Ministry.

The cost of Indonesian coal cargoes with an energy value of 5,000 kilocalories per kilogram slid 7.6 percent in the three months to the beginning of May, compared with a 17 percent decline in higher-quality fuel from the Australian port of Newcastle, a regional benchmark price. The difference between Indonesia’s sub-bituminous coal and Newcastle prices is the smallest in more than two years.

To contact the reporter on this story: Fitri Wulandari in Jakarta at fwulandari@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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