The Indonesia’s Trade Ministry has issued a regulation requiring companies to use national shipping companies and national insurance firms when exporting coal as the country seeks to develop its export of services, including shipping and insurance services.
According to the decree signed by Indonesia’s Trade Minister Enggartiasto Lukits on Oct. 26, 2017, coal and crude palm oil must be shipped overseas using national shipping companies, unless the local firms are unable to provide the vessels. It also applies for rice imports.
With the new regulation, which will be in effect in April 2018, sellers must offer buyers to use national shipping and insurance companies to deliver the power-station fuel, Oke Nurwan, director general of foreign trade at the Trade Ministry, told CoalMint by phone.
“They will have to calculate the costs of using Indonesian vessels. The regulation will encourage national shipping companies to be more competitive with foreign shipping ones,” he said.
Nurwan said Indonesian National Shipowners’ Association, palm oil producers and coal companies still need to discuss the availability of the vessels. The government has yet to decide whether to apply the regulation for minerals or other commodities.
The regulation could hit coal deliveries from Indonesia, the world’s top exporter of the fuel, as nearly 95 percent of the country’s coal shipments is transported by foreign-owned vessels. Indonesian coal sellers normally ship coal under free-on-board basis, which let buyers to arrange for vessels and insurance.
Coal and palm oil are two Indonesia’s main non oil-and-gas exports. Indonesia’s coal exports rose by 5.3 percent in January to October 2017 to 320.6 million tons, from 304.4 million tons in the same period a year ago, according to data from Indonesia’s central bank, Bank Indonesia.
“It could incur additional costs for buyers. They use foreign vessels because international shipping companies have vast network and more efficient,” Hendra Sinadia, deputy executive director at the Indonesian Coal Mining Association, told CoalMint by phone.
There is also uncertainty about the availability of coal vessels in Indonesia as the Indonesian Nasional Shipowners’ Association or INSA has yet to inform coal miners on what type of coal vessels owned by domestic companies, Sinadia said.
“The regulation is good, but if the industry isn’t ready, it can cause uncertainty,” he added.
Key points of Trade Minister Decree on the use of National Shipping and Insurance Companies for Coal and Palm Oil Exports and Rice Imports:
1. Coal and crude palm oil exporters as well as rice importers must use vessels operated by national companies.
2. Exporters must use national insurance companies to insure their shipments.
3. If national companies have limited vessels available or don’t have the required vessels, exporters can use foreign-owned vessels.
4. Exporters and importers must report the use of national shipping and insurance companies to the Trade Ministry every 15th of the following month.
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