JAKARTA, Jan 4 — Indonesia has warned that its coal supply situation remains critical, ahead of tomorrow’s review of its export ban, unnerving global markets for the fuel used to generate most of the electricity that drives Asia’s biggest economies.
Coal futures in China, the world’s biggest consumer of the fuel, surged today after Indonesia, the top exporter of the coal used in power plants and China’s largest overseas supplier, on Saturday banned exports for January to avoid outages at its domestic generators.
The price rise is among the first signs of the impact of Indonesia’s coal export ban, which threatens the energy security of some of the world’s biggest economies such as China, India, Japan and South Korea.
China’s benchmark thermal coal futures rose by as much as 7.8 per cent in the first day of trading since the policy was announced and closed at 713.80 yuan (RM468) a tonne, up 6.4 per cent.
That was the biggest daily increase since October 19, when prices climbed to a record 1,848 yuan a tonne amid a supply deficit in China caused by shortages from domestic mines.
Late yesterday, Indonesia’s state-owned electric utility Perusahan Listrik Negara (PLN) said it has secured 3.2 million tonnes of coal out of the 5.1 million tonnes of additional supply for January it needs to avoid widespread outages.
But, it warned that “this critical period is not yet over”, adding that it continued to coordinate with the government and other coal suppliers.
Some smaller miners have declared force majeure on their shipments, the legal term for when a supplier cannot meet a contract because of forces beyond their control, coal traders based in Singapore and India said on Tuesday.
The firms that declared the force majeure were mostly ones who had not fulfilled the so-called domestic market obligation (DMO), a coal mining executive in Jakarta said.
Under the DMO, miners are required to sell 25 per cent of their output to local power plants at a maximum price of US$70 (RM293) per tonne.
Indonesian President Joko Widodo threatened yesterday to revoke the business permits of miners who failed to meet their DMO requirements.
The export ban endangers Asia’s economic powerhouses China, India, Japan, and South Korea, which together received 73 per cent of Indonesian coal exports in 2021, shiptracking data from Kpler showed.
Indonesian authorities are set to reexamine the export ban tomorrow.
Full-month ban unlikely
Pandu Sjahrir, chairman of the Indonesian Coal Miners Association, said yesterday the group’s ten biggest members will help PLN close the supply gap as a “very short-term solution”.
Indonesian miners met with the trade ministry for discussions again on Tuesday, said an industry group source. “The government is trying to make the exports work ... the main priority is availability of coal supply to PLN,” the source said.
Because of the major producers’ willingness to work with PLN to resolve the issue, a full-month ban might be avoided, said Rory Simington, principal analyst for Asia Pacific coal research at Wood Mackenzie.
“A halt in Indonesia’s exports would have a major impact on thermal coal markets but a total ban for January is unnecessary and unlikely to be implemented in our view,” Simington said.
“We are expecting 40 million tonnes of Indonesian exports in January and total domestic demand is in the region of 12 million tonnes; addressing any shortfall would require only a fraction of total capacity,” he added.
Today, Indonesian State-Owned Enterprises (SOE) Minister Erick Thohir said in a statement the ministry is working to improve PLN’s coal supply management and infrastructure.
“We at the SOE Ministry will improve the long-term supply contracts,” Erick said, adding that the logistics system and infrastructure would also be upgraded to ensure domestic coal needs are met.
Analysts yesterday warned that India, which consumed over 15 per cent of Indonesia’s 2021 coal exports, might re-route shipments from other suppliers if the ban persists.
That could mean higher demand for coal from Australia, also a major supplier to Asia. Shares of Whitehaven Coal jumped as much as 9.2 per cent today, the most since July 16. — Reuters
