Bloomberg News

Indonesia Sub-Bituminous Coal Swaps Fall; China Prices Decline

May 15, 2012

Swaps contracts dropped 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. Prices for deliveries to China fell.

The June 2012 contract for Indonesian sub-bituminous coal with a heating value of 4,900 kilocalories a kilogram fell 60 cents to $73.90 a metric ton on a net as-received basis yesterday, according to data from the energy broker. Swaps for the third quarter of 2012 were $1 lower at $73 a ton.

Contracts for China coal also declined. Coal with a heating value of 5,500 kilocalories a kilogram on a net as-received basis for shipments to South China for June fell $1.70, or 1.7 percent, to $96.65 a ton, Ginga said. The swap for the third quarter declined $1.50 to $97.

The price of Chinese coal for power stations fell for the first time in three years for May, a month when power producers normally buy to stockpile the fuel before peak demand in the summer. The benchmark grade at Qinhuangdao port with an energy value of 5,500 kilocalories per kilogram fell 0.6 percent from a week earlier to a range from 775 yuan ($123) to 785 yuan a ton as of May 13, according to data from the China Coal Transport and Distribution Association.

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 classified 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 better quality stock. Sub-bit coal has kilocalories of less than 6,100 per kilogram, according to the Indonesian Energy Ministry.

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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