Coal Ash Content Was Right. The Calorific Value Was the Problem.
Quote from chief_editor on May 22, 2026, 3:30 pmCoal buyers focus on ash content because it is the most visible quality parameter. Calorific value, on the basis used in the contract, is where disputes live.
A power utility in Southeast Asia contracted for 50,000 tonnes of thermal coal from a trader. The specification: 5,200 kcal/kg GAR (Gross As Received), maximum 15% ash, maximum 0.8% total sulfur. The pre-shipment inspection certificate confirmed ash at 13.1% and sulfur at 0.72%. No issues noted. The bill of lading loaded and the cargo shipped from a Kalimantan port in Indonesia.
At discharge, the buyer's surveyor sampled and tested. Ash was 13.4% — marginally higher but within the tolerance typically accepted in coal trades. Sulfur was 0.74% — also fine. Calorific value: 4,980 kcal/kg GAR.
The cargo was 220 kcal/kg below the contract minimum on a GAR basis. On a NAR (Net As Received) basis — which is how the buyer's boilers were calibrated — the number translated to an effective calorific deficit that required significantly more coal per unit of electricity generated. The cargo was technically receivable but commercially underperforming, and the buyer demanded a price adjustment.
The dispute: the contract specified 5,200 kcal/kg GAR as a minimum. The load port certificate confirmed this minimum was met at loading. The discharge testing showed 4,980. The seller's position: load port certificate is final. The buyer's position: the contract was for a minimum that was not met at discharge, regardless of what the load port said.
GAR vs. NAR: The Basis Matters More Than the Number
Gross As Received and Net As Received are two different calorific value measurements for the same coal. GAR includes the latent heat of vaporization of moisture. NAR subtracts it. The relationship between GAR and NAR depends on the total moisture content of the coal: NAR is approximately GAR minus (total moisture × 50.3) — the exact formula is standardized in ASTM D5865 and ISO 1928.
The implication is that GAR and NAR values for the same coal will differ by an amount that depends on moisture. High-moisture Indonesian coals — subbituminous coals with total moisture often in the 20 to 40% range — have a larger GAR-to-NAR spread than lower-moisture coals. A coal specified at 5,200 kcal/kg GAR may correspond to 4,200 to 4,400 kcal/kg NAR, depending on moisture content.
Buyers whose end-use equipment — boilers, cement kilns, power plants — is calibrated on a NAR basis are optimizing against NAR values. When they buy coal specified on a GAR basis, the contractual specification and their operational requirement are measuring different things. A coal that meets the GAR specification may still underperform operationally if the moisture content is higher than assumed in the specification design.
Most experienced coal buyers understand this distinction. The disputes arise with buyers who are newer to coal trading, buyers who specify GAR because that is what the seller's standard offer uses, and buyers who negotiate the minimum calorific value without establishing the test method, the sampling basis, and the tolerance band for each quality parameter.
Industry estimates suggest that calorific value disputes in the Indonesian thermal coal trade — one of the world's highest-volume thermal coal flows — are among the most common quality claims in that market, partly because Indonesian subbituminous coal has inherently higher moisture variability than coals from other major origins, and partly because the Indonesian market has a large number of small and medium sellers whose documentation practices are less standardized than major miners.
The Rejection Option and Its Consequences
A buyer who receives coal significantly below specification on calorific value has several options: accept the cargo with a price discount negotiated with the seller, reject the cargo and arrange for its disposal or return, or accept the cargo and pursue arbitration for the price difference. Each option has costs.
Rejection is the most disruptive: the cargo is on a vessel that has already been demurraged for waiting, and finding an alternative buyer for off-spec coal on short notice is a commodity-specific problem. The discount negotiation is the most common resolution — the question is who has more leverage at that moment. A buyer who needs the coal to run their plant has limited leverage. A buyer who has alternative supply available has more. The power to negotiate the adjustment depends on operational facts that were determined before the cargo arrived, not at the moment of the dispute.
Coal buyers focus on ash content because it is the most visible quality parameter. Calorific value, on the basis used in the contract, is where disputes live.
A power utility in Southeast Asia contracted for 50,000 tonnes of thermal coal from a trader. The specification: 5,200 kcal/kg GAR (Gross As Received), maximum 15% ash, maximum 0.8% total sulfur. The pre-shipment inspection certificate confirmed ash at 13.1% and sulfur at 0.72%. No issues noted. The bill of lading loaded and the cargo shipped from a Kalimantan port in Indonesia.
At discharge, the buyer's surveyor sampled and tested. Ash was 13.4% — marginally higher but within the tolerance typically accepted in coal trades. Sulfur was 0.74% — also fine. Calorific value: 4,980 kcal/kg GAR.
The cargo was 220 kcal/kg below the contract minimum on a GAR basis. On a NAR (Net As Received) basis — which is how the buyer's boilers were calibrated — the number translated to an effective calorific deficit that required significantly more coal per unit of electricity generated. The cargo was technically receivable but commercially underperforming, and the buyer demanded a price adjustment.
The dispute: the contract specified 5,200 kcal/kg GAR as a minimum. The load port certificate confirmed this minimum was met at loading. The discharge testing showed 4,980. The seller's position: load port certificate is final. The buyer's position: the contract was for a minimum that was not met at discharge, regardless of what the load port said.
GAR vs. NAR: The Basis Matters More Than the Number
Gross As Received and Net As Received are two different calorific value measurements for the same coal. GAR includes the latent heat of vaporization of moisture. NAR subtracts it. The relationship between GAR and NAR depends on the total moisture content of the coal: NAR is approximately GAR minus (total moisture × 50.3) — the exact formula is standardized in ASTM D5865 and ISO 1928.
The implication is that GAR and NAR values for the same coal will differ by an amount that depends on moisture. High-moisture Indonesian coals — subbituminous coals with total moisture often in the 20 to 40% range — have a larger GAR-to-NAR spread than lower-moisture coals. A coal specified at 5,200 kcal/kg GAR may correspond to 4,200 to 4,400 kcal/kg NAR, depending on moisture content.
Buyers whose end-use equipment — boilers, cement kilns, power plants — is calibrated on a NAR basis are optimizing against NAR values. When they buy coal specified on a GAR basis, the contractual specification and their operational requirement are measuring different things. A coal that meets the GAR specification may still underperform operationally if the moisture content is higher than assumed in the specification design.
Most experienced coal buyers understand this distinction. The disputes arise with buyers who are newer to coal trading, buyers who specify GAR because that is what the seller's standard offer uses, and buyers who negotiate the minimum calorific value without establishing the test method, the sampling basis, and the tolerance band for each quality parameter.
Industry estimates suggest that calorific value disputes in the Indonesian thermal coal trade — one of the world's highest-volume thermal coal flows — are among the most common quality claims in that market, partly because Indonesian subbituminous coal has inherently higher moisture variability than coals from other major origins, and partly because the Indonesian market has a large number of small and medium sellers whose documentation practices are less standardized than major miners.
The Rejection Option and Its Consequences
A buyer who receives coal significantly below specification on calorific value has several options: accept the cargo with a price discount negotiated with the seller, reject the cargo and arrange for its disposal or return, or accept the cargo and pursue arbitration for the price difference. Each option has costs.
Rejection is the most disruptive: the cargo is on a vessel that has already been demurraged for waiting, and finding an alternative buyer for off-spec coal on short notice is a commodity-specific problem. The discount negotiation is the most common resolution — the question is who has more leverage at that moment. A buyer who needs the coal to run their plant has limited leverage. A buyer who has alternative supply available has more. The power to negotiate the adjustment depends on operational facts that were determined before the cargo arrived, not at the moment of the dispute.