The Indonesian government will reevaluate the ban on coal exports for the month of January enforced on December 31 to secure domestic supply on January 5, but all coal exports are still not allowed ahead of the date.
Almost 20 power plants with a total capacity of 10.85 GW would be out of work if the ban isn’t imposed, which could cause a blackout affecting 10 million residential and industry customers, said Ridwan Djamaludin, director-general of the Ministry of Energy and Mineral Resources (ESDM) in a statement.
Only 35,000 tonnes or less than 1% were delivered out of 5.1 million tonnes of coal supply to the state-owned power plant PLN assigned by the Indonesian government, Djamaludin said. The ESDM ordered coal miners and exporters to divert coal from loaded ships at ports to power plants to prevent disruption to the national electricity system.
Participants have confirmed with Sxcoal that the ban has been at place. An Indonesian trader said he has loaded a Panamax vessel with 6,000 Kcal/kg NAR coal to Japan and is not allowed to sail. Another source noted “anyone who has contacts with Vietnamese buyers can kiss the contracts goodbye for now, since the PLN uses the same grade of fuel.”
About 14 vessels under and after loading are held up in Kalimantan due to the ban, according to an Indonesian coal buyer. “It came with immediate effect and has caused a panic since the morning (January 1) especially at a time when some people are on vacation for new year,” he said.
The Indonesian Coal Mining Association (ICMA) called on the energy minister to revoke the export ban, saying in a statement the policy was “taken hastily without being discussed with business players”.
The widespread export ban may disrupt monthly coal production volumes of around 38-40 million tonnes said ICMA Chairman Pandu Sjahrir. In recent years, Indonesia has exported about 30 million tonnes of coal in the month of January.
The ICMA said it was also concerned about potential disputes with buyers if coal producers declared force majeure for not being able to deliver coal exports, noting this will also cause uncertainty to ships sailing, affecting Indonesia’s reputation and reliability as world’s coal supplier.
The ESDM eventually agreed to re-evaluate the ban on January 5 at the earliest, Djamaludin said at a virtual meeting held close to the noon of January 1, but the attitude towards on the ban remained tough, with a message sent from a senior official that mines that don’t fulfill the obligation will get their licenses revoked.
Targeting the current supply shortage and the export ban, participants have raised some questions and suggestions during the meeting, including raising the price of domestic market obligation (DMO), whether there will be compensation for the failed exports, and even force majeure.
While most questions received no clear answers, one question was answered explicitly that miners that have completed the DMO are still subjected to the export ban.
Indonesia is the world’s biggest exporter of thermal coal, exporting around 400 million tonnes in 2020. Its biggest customers are China, India, Japan and South Korea.
Chinese buyers in watch-and-see stance
Chinese buyers, who are still in the three-day New Year holiday, remained sitting on the sidelines waiting for further developments due to the uncertainty.
The ban came all of sudden and caught Chinese buyers unprepared. Some utilities will have to rush for alternative cargoes from domestic or other seaborne sources if it is materialized after January 5.
This would push the seaborne coal prices higher in coming weeks and even drive up the Chinese domestic prices as well.
However, the prices in February and even March could be negatively impacted. “If coal export is not allowed in January, the shipments of originally January-loading cargoes will be delayed to February or even March, when the demand is typically low due to the Chinese Lunar New Year holiday,” one Chinese trader said. This also means more supplies would arrive in next two months.
The Chinese domestic market remained on the downward trend and were yet to respond to the changed seaborne dynamics. On January 1, several coal mines in Shaanxi province decided to lower their mine-mouth prices by 80-100 yuan/t from next day.
The Chinese government urged to further boost domestic supply, according to an emergency notice issued by the National Development and Reform Commission (NDRC) on December 31.
The NDRC required the long-term contract supply for January to be executed as per the way in December, and asked power plants in northern China to further raise stockpiles, especially for those in Hebei, which should ramp up stocks to more than 30 days of use as the Winter Olympic Games draws nearer.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
Leave a Reply