Coal Reference Price Hits Record High of US$330 Per Ton: Here's What's Driving It

The Ministry of Energy and Mineral Resources reported that the Indonesian Coal Reference Price (HBA) in October 2022 increased by US$11.75 per ton to US$330.97/ton, up from US$319.22/ton in September. The resumption of coal-fired power plant operations in parts of Europe has driven up global coal demand.

The October HBA increase was influenced by the rise in the average monthly index used to calculate the HBA: the ICI increased by 3.63%, Platts by 4.41%, GNCC by 3.98%, and NEX by 3.08%.

"In addition to the increase in the average index, European countries such as Germany, the Netherlands, and Belgium have reactivated coal-fired power plants due to Russia's reduction in gas supplies," said Agung Pribadi, Head of the Bureau of Communication, Public Information Services, and Cooperation (KLIK) at the Ministry of Energy and Mineral Resources, on Monday (3/10).

Another factor influencing the HBA increase is the supply constraint of natural gas in Europe. "The gas pipeline leak in the Baltic Sea caused gas prices to surge," Agung explained in his official statement.

October's HBA movement is the highest since the beginning of 2022, with the previous highest value occurring in June, when the HBA reached US$323.91/ton. Geopolitical conditions in Europe due to the Russia-Ukraine conflict and the electricity crisis in India due to the heatwave remain major contributing factors.

Subsequently, the HBA fluctuated, experiencing both increases and decreases. The HBA was at US$321.59/ton in August and US$319.22/ton in September.

The HBA itself is derived from the average of the Indonesia Coal Index (ICI), Newcastle Export Index (NEX), Globalcoal Newcastle Index (GCNC), and Platt's 5900 from the previous month, with a standardized quality of 6322 kcal/kg GAR, 8% Total Moisture, 0.8% Total Sulphur, and 15% Ash.

This price will be directly used in the buying and selling of coal commodities (spot) for one month at the Free on Board (FOB Vessel) delivery point.