Indonesia has banned coal exports in Jan’22 amidst concerns over low supplies for its domestic power sector, the Indonesian energy ministry informed on 31 Dec’21.
As per the ministry’s circular, companies holding PKP2B, IUP, Production Operation IUPK, IUPK as continuation of contract/agreement operations and holders of coal transportation and sales licenses are forbidden from exporting the material.
The move came against the backdrop of lower coal production in the country this year following heavy rainfall and the struggles the country’s miners had to undergo to meet their domestic market obligation (DMO).
As per the country’s DMO policy, miners are expected to supply at least 25% of their annual production to state utility Perusahaan Listrik Negara (PLN) at a maximum price of $70/t below current market prices.
Limited coal availability at PLN
The government has cited critically low coal stock levels at the sate power generator PLN and other independent power producers amidst the apprehension of extreme weather conditions during Jan-Feb’22.
As per Ridwan Djamaluddin, Head, Directorate General of Minerals and Coal, seven power plants in the country will be in a critical coal shortage situation on 5 Jan.
The status of the supply situation at the domestic power utilities is likely to “disrupt the operation of the PLTU which has an impact on the national electricity system”.
The Southeast Asian country is a major thermal coal exporter, shipping around 321 million tonnes (mn t) of thermal coal in CY’20, as per CoalMint data. Its biggest customers include China, India, Japan, and South Korea.
Demand of miners
In a zoom meeting held earlier today, participants proposed to increase the price of DMO for the upcoming month and clarified details regarding force majeure, compensation and signed contracts in terms of exports.
As per response from market participants, the government may reconsider the export ban after 5 Jan after assessing the situation. Further, it said that as soon the supply is completed, the policy will be revoked. For companies that do not comply will have their licenses revoked.
Coal exports
During Jan-Nov’21, Indonesian miners exported a total of 292.04 mn t of coal, largely unchanged from last year.
Amidst heavy rainfall this year, miners in the country have missed their output target. As on 10 Dec, coal output was 560 mn t, only 89.6% of the annual target of 625 mn t.
Short-term outlook
In the event of a shortage of Indonesian coal, global thermal coal prices are likely to rise, affecting major importers such as India, China, and Pakistan.
Chinese demand for imported thermal coal is expected to be limited ahead of the Lunar New Year holidays and the Winter Olympics due to which manufacturing activities are expected to remain on a low key.
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