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Indonesian Lower-Quality Coal Swaps Slide; China Rises

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. China prices rose.

The price for Indonesian sub-bituminous coal with a heating value of 4,900 kilocalories a kilogram for loading in June fell 75 cents to $68.35 a metric ton on a net as-received basis May 25, the energy broker said. The contract for the third quarter dropped 80 cents to $67.50 a ton.

Coal with a calorific value of 5,500 kilocalories a kilogram on a net as-received basis for shipments to South China for June rose 10 cents to $90.20 a ton, Ginga said. The swap for the third quarter was unchanged at $90.25 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.

Power-station coal will stay under pressure until seasonal demand increases next quarter in China, where domestic stockpiles are high and imports are being deferred, according to Australia & New Zealand Banking Group Ltd.

“Price activity will remain subdued” until the end of the third quarter, when Chinese demand should start to reduce inventories, Mark Pervan, the head of commodity research at ANZ in Melbourne, said in a note today. Thermal-coal prices at the Australian port of Newcastle, the benchmark contract for Asia, fell below $100 a metric ton last month for the first time since October 2010.

About 60 percent of Indonesia’s coal 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.

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