Chinese buyers continue chasing low-CV Indonesian coal as arbitrage window holds

• Demand remains firm for branded 3,400 GAR cargoes
  
  
• Rising Chinese domestic prices supporting low-CV imports
  
  

Chinese buyers returned from the Labour Day holiday period with renewed interest in ultra-low-calorific-value Indonesian coal, particularly branded 3,400 kcal/kg GAR cargoes.

Rising domestic coal prices in China continue to support favourable import arbitrage conditions for low-CV coal, increasing buying activity for Indonesian supply.

Indicative offers for branded Kalimantan-origin 3,400 GAR coal were heard at $41.9542.45/t FOB on a Supramax basis for first-half June loading.

Bids for similar cargoes were reported near $41.45/t FOB.

Non-branded cargoes continued trading at a discount, with indications heard at $39.9540.45/t FOB for May loading.

Indonesian low-CV coal market

FOB Kalimantan 3,400 GAR coal prices were assessed at $37.25/t, up by $0.10/t compared to 5 May levels, supported by improved buying interest from Chinese importers following the Labour Day holidays.

Meanwhile, FOB Kalimantan 4,200 GAR prices increased by $0.20/t to $61.50/t, reflecting steady regional demand and firm market sentiment in the Indonesian thermal coal market.

In China, import prices also strengthened across calorific value categories.

China import price snapshot (CFR South China)

Portside Indonesian coal prices witnessed an upward movement across key grades. PCC 5 (3,000 NAR) was assessed at $50.15/t, marking a marginal increase of $0.25/t compared to 5 May. In contrast, PCC 8 (5,500 NAR) recorded a stronger gain of $2.70/t, reaching $117.65/t. The firmer trend reflects improved demand sentiment and strengthening price support in the market.

Higher-grade coal prices also strengthened, although sentiment in the high-CV segment has become more cautious following the recent rally.

Meanwhile, Indonesian thermal coal exports averaged just 930,000 t/day over the latest five-day period, remaining well below the 2025 average of 1.31 mnt/day.

Underlying drivers

1. Chinese buyers continue shifting toward low-CV imports

Chinese buyers are increasingly favouring lower-calorific-value imported coal because of widening price differentials between domestic and imported supply.

Domestic Chinese prices for mid-CV coal have risen sufficiently to make imported Indonesian low-CV coal economically attractive again.

Market participants noted that the current arbitrage structure continues to favour importing 3,400 GAR Indonesian coal rather than purchasing higher-grade domestic Chinese coal.

This has supported stronger buying interest for ultra-low-CV cargoes following the holiday period.

2. Low-CV coal is outperforming high-CV segments

Unlike the high-CV market, which has recently entered a consolidation phase, low-CV Indonesian coal continues benefiting from relatively stronger import arbitrage economics into China.

Chinese buyers remain increasingly focused on:

• Fuel cost optimisation
  
  
• Blending flexibility
  
  
• Lower delivered energy costs
  
  

As a result:

• 3,400 GAR demand remains strongest
  
  
• 3,800 GAR demand remains stable
  
  
• 4,200 GAR demand continues, although buying activity is less aggressive
  
  

The market is increasingly being driven by value-based optimisation rather than outright calorific value preference.

3. Indonesian supply tightness continues supporting prices

Indonesian supply constraints continue limiting prompt cargo availability, particularly for branded low-CV cargoes.

Most miners remain focused on:

• Domestic Market Obligation (DMO) fulfilment
  
  
• Managing production within existing RKAB quotas
  
  

The decline in Indonesian export flows continues reinforcing tight physical market conditions.

At the same time, the successful transit of two LNG carriers through the Strait of Hormuz has slightly eased immediate panic sentiment across broader energy markets.

However, this has had a more noticeable impact on high-CV coal and LNG markets than on low-CV Indonesian coal, where arbitrage fundamentals remain relatively supportive.

Outlook

Chinese demand for low-CV Indonesian coal is expected to remain firm in the near term, although buying activity will continue depending on:

• Summer electricity demand trends
  
  
• Domestic Chinese coal price movements
  
  
• Renewable generation levelsIndonesian export availability
  
  

The arbitrage window for low-CV imports currently appears sustainable as long as domestic Chinese prices remain elevated.

At the same time, Indonesian supply tightness-particularly for branded cargoes-is expected to continue supporting FOB prices through June.

While broader high-CV coal markets are showing signs of consolidation, low-CV Indonesian coal continues to demonstrate relatively stronger underlying demand support.

Market View

• Market tone: Firm but selective
  
  
• Short-term bias: Positive for low-CV coal
  
  
• Relative strength: Low-CV coal outperforming high-CV segments