Indonesia Warns Coal Supply Crunch Not Over As China Prices Rally

COAL - ​JAKARTA. Indonesia has warned that its coal supply situation remains critical, ahead of Wednesday'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 on Tuesday 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 the generators run by state-owned utility Perusahan Listrik Negara (PLN).

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.

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China's benchmark thermal coal futures rose by as much as 7.8% in the first day of trading since the policy was announced and were at 712.40 yuan ($111.81) a tonne. That is the highest since Dec. 20 and futures are set for their biggest gain since Oct. 19.

Late on Monday, 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.

At the same time, Indonesian President Joko Widodo said that coal miners, as well as liquefied natural gas producers, must prioritise domestic supply and ensure energy security in Indonesia before exporting.

He threatened to revoke the business permits of miners which failed to meet a so-called domestic market obligation (DMO) that requires them to sell 25% of their coal output to the domestic market at a maximum price of $70 per tonne.

Finance Minister Sri Mulyani Indrawati said the ban was enacted to avoid disrupting the recovery of Indonesia's economy, Southeast Asia's biggest, from the COVID-19 pandemic.