Indonesia’s decision to mandate the use of domestic shipping companies for handling the exports of coal, may cause the country lose ground on exports.
Japanese Ship owners’ have drawn criticism of the move made by the Indonesian government, citing that it would only drive up the freight charges.
Indonesia is the world’s top thermal coal exporter, which is widely used for power generation. As per the data provided by Japanese customs, the country had procured 32.08 MnT coal or nearly 16% of its total coal import of 199.31 MnT, from Indonesia in 2017.
The implementation of the new shipping rule is likely to have a substantial impact. Japanese shipping firms have raised their voice against the shipping rule, a decision that certainly would increase the transportation cost and reduce the competitiveness of Indonesian coal in term of pricing.
The shipping firms had also underlined the inability of the Indonesian shipping industry to move all the export shipments as they were made-up of small scale operators.
Japan’s Transport Ministry had even urged the Indonesian government to scrap the regulation on grounds that it is in violation of World Trade Organization rules, as well as the bilateral Economic Partnership Agreement between the two countries. However, no progress was made in this regard.
The implementation of this rule is likely to drive Japanese coal buyers toward other supply sources, such as Australia, ultimately Indonesian coal exports would decline.
Last year, Indonesia’s Trade Ministry issued a regulation requiring coal and crude palm oil must be shipped overseas using national shipping companies, unless the local firms are unable to provide the vessels.
Media reports claimed that the Indonesian government has decided to delay the implementation of domestic shipping rule, however, the government had yet to issue a new regulation to revise it. The new regulation was supposed to be in effect from Apr’18.
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