Indonesia Miners Seek Solution As Coal Export Ban Rattles Sector

January 03, 2022, 09.47 PM | Source: Reuters
Indonesia Miners Seek Solution As Coal Export Ban Rattles Sector

ILUSTRASI. Coal Miners


COAL - ​JAKARTA/CHENNAI. Indonesian coal miners want a quick resolution to a government coal export ban that has caused fuel prices to rise and could disrupt the energy supplies of some of the world's biggest economies.

The world's leading exporter of thermal coal on Saturday banned the shipments because of concerns it could not meet its own power demand, prompting President Joko Widodo on Monday to threaten to revoke business permits for any miners who failed to meet domestic market requirements.

The wider risk is of a knock-on impact on economic linchpins China, India, Japan, and South Korea, which together received 73% of Indonesian coal exports in 2021, shiptracking data from Kpler showed.

Major coal trading hubs such as Australia are closed on Monday to mark new year holidays, but prices for coal to India's west coast have climbed by as much as 500 rupees ($6.73) per tonne since the ban was announced, Riya Vyas, a business analyst at iEnergy Natural Resources Limited, said.

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She did not know of any instances of force majeure, which exporters declare when they cannot supply fuel because of events beyond their control.

The ban follows a tumultuous year for global coal. Prices surged in response to a supply crunch in China, the world's biggest consumer, and the most commonly exported grade of Indonesian coal rose to a record $158 per tonne in October, though it slipped $68 on Dec. 29, data from Caixin showed.

Indonesia enacted the ban because low coal inventories at domestic power plants could lead to widespread blackouts. Its government plans to reassess the decision on Wednesday.

Under its Domestic Market Obligation (DMO) policy, coal miners must supply 25% of their annual production to state utility Perusahaan Listrik Negara (PLN) at a maximum price of $70 per tonne, below current market prices.

"This is absolute, should not be violated for any reason," Jokowi, as the president is known, said in an online address.

"Companies who are unable to fulfill their obligations to meet domestic needs may be subject to sanctions. If necessary, not only do they not get an export permit but also revocation of their business permits."

He said coal miners, and also liquefied natural gas producers, must prioritise domestic supply.

Finance Minister Sri Mulyani Indrawati said the government was forced to act swiftly.

"If we let power outages take place so exports can continue, the recovery in Indonesia will be threatened," she told reporters. "There must be sacrifices ... The government picked the one with as minimal impact as possible to the economy."

Editor: Yudho Winarto

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