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Coal Prices Soar to 17-month High
Wednesday, 03 August, 2016 | 13:42 WIB
Coal Prices Soar to 17-month High

TEMPO.CO, Jakarta - Coal price soared to its highest level in 17 months in the aftermath of China's decision to raise imports.

On Friday, July 29, the September contract price at the Rotterdam exchange stood at US$62.65 per ton, the highest since March 2015. With that, the year-to-date coal price increase has reached 45.02 percent.

Nevertheless, coal prices are still prone to correction as there are projections that the Federal Reserve will raise interest rates in quarter four.

Ibrahim, president director at PT Garuda Berjangka, said that coal prices began climbing in mid-July after the Chinese government laid off some 800,000 workers in the coal and steel industries. This reform by the world's largest coal producer has since strongly affected the commodity's price movements.

In June, China raised its imports by 21.75 million tons, the highest since December 2014. In sememster one this year, China's coal import volume reached 108 million tons or growing 8.2 percent year on year.

"Low coal prices urged Chine to change its strategy; switching from being a producer to importer," Ibrahim said on Monday, August 1, Bisnis Indonesia reported.

In addition to China, other producing countries like Australia, Indonesia, and Colombia has begun lowering their coal outputs.

To cope with weak prices, the Indonesian Energy and Mineral Resources Ministry plans to release a moratorium on coal mining. Ibrahim said this is a normal step to take considering the overly cheap prices of coal.

Coal prices are expected to decline soon to US$61 per ton. The negative expectation stems from the release of China's manufacturing index in July, which dropped to 49.9, below analysts' initial estimate of 50.1.



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