Indian Coal Buyers Seek Deferrals as Rupee Slump Raises Costs

Coal buyers in India, the world’s third-largest user, are negotiating to defer imports from Indonesia as the slump in the rupee makes them more expensive.

Buyers are asking to delay shipments of Indonesian thermal coal for as long as one month as they seek to negotiate lower prices with suppliers, Ramli Ahmad, the managing director of PT Asia Pacific Mining Resources, which trades 2 million metric tons a year, said at a conference in Balikpapan, Indonesia yesterday. “Some are not clear on how long they are asking to delay,” he said.

The rupee fell to a record low of 68.845 per dollar last week as fund outflows from the local financial market left the currency vulnerable to an unprecedented current-account deficit. The currency has weakened 19 percent so far this year, according to prices from local banks compiled by Bloomberg. India was the biggest buyer of Indonesian coal last year after China.

Indian importers are seeking to buy the fuel with a heating value of 5,500 kilocalories a kilogram on a net as-received basis at $79 to $80 a ton while Indonesian suppliers are offering at $85 a ton, cost and freight basis, said Ashok Mitra, the chief financial officer of PT Kaltim Prima Coal, a unit of Indonesia’s largest coal producer, PT Bumi Resources. Indonesian sellers are offering coal with a heating value of 3,600 kilocalories a kilogram at $37 to $38 a ton while Indian buyers are bidding at around $35 a ton, Mitra said.

“Indian buyers want to cover any increase in costs because of rupee depreciation through a reduction in price from the coal producers,” Mitra said at the conference. “There won’t be any default. They have to take the cargo, but the issue will be on the price.”

Deferral requests from Indian buyers are unlikely to cut purchases because of demand for electricity and lack of local coal supply, Mitra said.

India increased coal imports by 50 percent in July, receiving 13.3 million tons of steam coal and 3.12 million of the coking variety, according to Interocean, a New Delhi-based shipper.

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