CM – How Indonesia, the world’s leading exporter of steam coal, got into a supply crisis




Smoke and steam rise from Indonesia Power’s coal-fired power station next to an area for the Java 9 and 10 coal-fired power station in Suralaya, Banten Province, Indonesia, 07/11/2020. (Photo: REUTERS / Willy Kurniawan)

JAKARTA: Indonesia, the world’s largest exporter of steam coal, sent shock waves through the global energy markets this week by halting fuel exports in January due to critically low coal stocks in domestic power plants.

Coal makes up around 60 percent of Indonesia’s energy mix, and the Ministry of Energy announced that only 35,000 tons of coal had been delivered to the state-owned electricity company PLN by early 2022. PLN had secured 13.9 million tons as of Wednesday (January 5), but needs an additional six million tons to ensure a 20-day inventory of 20 million tons.

The Ministry of State-owned Enterprises said it was urgent on PLN to improve supply management and increase long-term procurement contracts.

As a short-term solution, the Indonesia Coal Miners Association said ten of its largest members would supply PLN in addition.

The coordinating minister for maritime and investment affairs , Luhut Pandjaitan, after meeting miners and other authorities on Thursday, told local media that the emergency was over and that his ministry would review a new « formula » for Internal Market Obligation (DMO) and come to a decision at a meeting on Friday.

Indonesia requires miners to sell 25 percent of their local production at a maximum price of $ 70 per ton for power plants fen.

Meanwhile, a benchmark export price set by the government has soared since early 2021, peaking at $ 215 per tonne in November due to a global energy crisis.

According to the minutes of a meeting between Miners and the Department of Commerce this week, 418 miners did not sell any of their coal to local generators in the past year.

In August, the Department of Energy suspended export permits for dozen of miners behind the meeting with DMOs.

Bahana Securities Research said in a note that this tug-of-war between the government and small miners can continue as long as there is a large gap between the DMO and world market price.

China, India, Japan and South Korea are usually the biggest buyers of Indonesian coal and together accounted for 73 percent of its exports in 2021, according to Kpler ship tracking data.

Indones ien’s coal export revenue is around $ 3 billion per month and was one of the main reasons behind the country’s record exports last year.

Japan, which imports 2 million tons of Indonesian coal a month, requested in a letter to the Indonesian energy minister to lift the export ban on high calorific coal and found that Indonesian power plants are using low calorific value coal.

Adaro Minerals Indonesia, a unit of Adaro Energy, said it had applied to export metallurgical coal that was earmarked for Steel making than is used to generate electricity.

Indonesia’s largest coal miner, Bumi Resources, is hoping the government will immediately lift the export ban on companies that meet their DMO requirements.

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