How Indonesia, the world’s top thermal coal exporter, hit a supply crunch

news-details

Indonesia, the world’s biggest thermal coal exporter, sent shockwaves through global energy markets this week by suspending exports of the fuel in January due to critically low coal supplies at domestic power plants.

Indonesia, the world’s biggest thermal coal exporter, sent shockwaves through global energy markets this week by suspending exports of the fuel in January due to critically low coal supplies at domestic power plants.

WHY DID INDONESIAN AUTHORITIES DECIDE TO ACT?

Coal makes up around 60% of Indonesia’s energy mix and its energy ministry said by the start of 2022 only 35,000 tonnes of coal had been delivered to state power firm PLN. PLN had secured 13.9 million tonnes by Wednesday but needs another six million tonnes to ensure a 20-day stock level of 20 million tonnes.

PLN in November estimated it would need 119 million tonnes for all of 2022.

The State-Owned Enterprises Ministry said it is pushing for PLN to improve supply management and increase long-term procurement contracts.

As a short-term fix, the Indonesia Coal Miners Association said ten of its biggest members would provide extra supply to PLN.

Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan, after meeting with coal miners and other authorities on Thursday, told local media the emergency was over and his ministry will review a new “formula” for the domestic market obligation (DMO) and come to a decision at a meeting on Friday.

INDONESIA’S DMO SYSTEM

Indonesia requires coal miners to sell 25% of their production locally at a maximum price of $70 per tonne for power plants.

Meanwhile, a government-set benchmark export price COAL-HBA-ID has soared since the start of 2021, peaking at $215 per tonne in November, due to a global energy crunch.

According to minutes of a meeting between miners and the trade ministry this week, 418 miners did not sell any of their coal to local generators last year.

In August, the energy ministry suspended export permits of dozens of miners who were behind meeting DMOs.

Bahana Securities Research said in a note that as long as there remained a wide gap between the DMO and global market price “this tug-of-war between the government and small miners can still continue”.

WHERE DOES INDONESIA’S COAL USUALLY GO?

China, India, Japan and South Korea are usually the top buyers of Indonesian coal, and together accounted for 73% of its exports in 2021, ship tracking data from Kpler showed.

Neighbouring Southeast Asian countries such as the Philippines and Vietnam are also growing markets.

Indonesia’s export earnings from coal are roughly $3 billion a month, and were one of the key drivers behind the country’s record exports last year.

EXEMPTIONS SOUGHT

Japan, which imports 2 million tonnes of Indonesian coal a month, wrote to Indonesia’s energy minister requesting that the ban on high-caloric coal exports be lifted, noting that Indonesian power plants use coal with low caloric value.

Japan also asked authorities to allow five loaded vessels to depart for Japan.

Adaro Minerals Indonesia ADMR.JK, a unit of Adaro Energy ADRO.JK, said it had asked to be allowed to export metallurgical coal, which is used to make steel rather than generate power.

Indonesia’s biggest coal miner Bumi Resources BUMI.JK said it hoped that the government will immediately lift the export ban imposed on companies that have met their DMO requirements.

Source: Reuters

You can share this post!

Related News

Comments

Leave Comments


instagram takipçi satın almak

Tik tok izlenme satın al

instagram takipçi satın almak mı istiyorsunuz ozaman sizlere türkiyenin en güvenilir sitesi olan instagramtakipz.com sitesini öneriyoruz iyi alışverişler diliyoruz.