Smoke and steam billows from the coal-fired power plant owned by Indonesia Power, next to an area for Java 9 and 10 Coal-Fired Steam Power Plant Project in Suralaya, Banten province, Indonesia, July 11, 2020. REUTERS/Willy Kurniawan
JAKARTA, Jan 7 (Reuters) – Indonesia, the world's biggest thermal coal exporter, sent shockwaves through global energy markets this week by suspending exports of the fuel in January due to critically low coal supplies at domestic power plants. read more
WHY DID INDONESIAN AUTHORITIES DECIDE TO ACT?
Coal makes up around 60% of Indonesia's energy mix and its energy ministry said by the start of 2022 only 35,000 tonnes of coal had been delivered to state power firm PLN. PLN had secured 13.9 million tonnes by Wednesday but needs another six million tonnes to ensure a 20-day stock level of 20 million tonnes.
PLN in November estimated it would need 119 million tonnes for all of 2022.
The State-Owned Enterprises Ministry said it is pushing for PLN to improve supply management and increase long-term procurement contracts.
As a short-term fix, the Indonesia Coal Miners Association said ten of its biggest members would provide extra supply to PLN. read more
Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan, after meeting with coal miners and other authorities on Thursday, told local media the emergency was over and his ministry will review a new "formula" for the domestic market obligation (DMO) and come to a decision at a meeting on Friday. read more
INDONESIA'S DMO SYSTEM
Indonesia requires coal miners to sell 25% of their production locally at a maximum price of $70 per tonne for power plants.
Meanwhile, a government-set benchmark export price has soared since the start of 2021, peaking at $215 per tonne in November, due to a global energy crunch.
According to minutes of a meeting between miners and the trade ministry this week, 418 miners did not sell any of their coal to local generators last year.
In August, the energy ministry suspended export permits of dozens of miners who were behind meeting DMOs.
Bahana Securities Research said in a note that as long as there remained a wide gap between the DMO and global market price "this tug-of-war between the government and small miners can still continue".
WHERE DOES INDONESIA'S COAL USUALLY GO?
China, India, Japan and South Korea are usually the top buyers of Indonesian coal, and together accounted for 73% of its exports in 2021, ship tracking data from Kpler showed.
Neighbouring Southeast Asian countries such as the Philippines and Vietnam are also growing markets.
Indonesia's export earnings from coal are roughly $3 billion a month, and were one of the key drivers behind the country's record exports last year.
Japan, which imports 2 million tonnes of Indonesian coal a month, wrote to Indonesia's energy minister requesting that the ban on high-caloric coal exports be lifted, noting that Indonesian power plants use coal with low caloric value.
Japan also asked authorities to allow five loaded vessels to depart for Japan.
Adaro Minerals Indonesia (ADMR.JK), a unit of Adaro Energy (ADRO.JK), said it had asked to be allowed to export metallurgical coal, which is used to make steel rather than generate power.
Indonesia's biggest coal miner Bumi Resources said it hoped that the government will immediately lift the export ban imposed on companies that have met their DMO requirements.
Our Standards: The Thomson Reuters Trust Principles.
Subscribe for our daily curated newsletter to receive the latest exclusive Reuters coverage delivered to your inbox.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers.
Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology.
The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs.
The industry leader for online information for tax, accounting and finance professionals.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile.
Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts.
Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.
All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
© 2021 Reuters. All rights reserved