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EXPORT - IMPORT - SINGAPORE. Indonesia's plan to route coal exports through a state firm has rattled traders and miners in the world's largest exporter over its viability, at a time when liquefied natural gas (LNG) supply disruptions due to the Iran war are boosting coal demand.
President Prabowo Subianto announced on Wednesday that exports of coal, palm oil and ferroalloys must be conducted through state firm Danantara Sumberdaya Indonesia, in a move to boost revenue and stabilise the rupiah currency that has nevertheless fuelled investor jitters.
The Southeast Asian nation accounts for about half of the global trade in electricity-grade coal, a supply that Asia can ill-afford to see squeezed as power generators in Japan and South Korea turn to coal to fill a gap left by LNG supply disruptions.
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But plenty of questions remain unanswered. "We asked about the contract status, traders and how the system will look like. We're still waiting because there are so many details we don't know yet," said Gita Mahyarani, executive director at the Indonesian coal miners association.
"Our value chain is vast. We need to understand first where DSI fits into this."
MINERS AND TRADERS SPOOKED BY NEW EXPORT POLICY
Ramli Ahmad, president director of Indonesian miner Ombilin Energi, said it was unclear how issues of price and logistical risk would be assessed.
"What is also unclear is whether miners will be compensated in the U.S. dollar or the rupiah, especially since the rupiah is volatile right now," he said.
Indonesia has issued a separate regulation requiring natural resources exporters to store 100% of their foreign earnings in state banks, effective June 1. Under the new policy, business will continue as usual during a transition period of up to three months, with all transactions overseen by DSI.
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Piero Marzi, a Vietnam-based coal trader at Coeclerici, said export controls could increase prices for importers and potentially disrupt some shipments in the short term.
Vasudev Pamnani, director at iEnergy Natural Resources, an India-based coal trading firm, said there was uncertainty over existing long-term contracts with Indonesian exporters. The Indonesian sovereign wealth fund, which oversees DSI, has said it will honour existing export contracts but may renegotiate prices that were set below global benchmarks.
"Until the rules are truly locked in and enforced consistently, the market will struggle to price in or plan around any of this," Pamnani said.
