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March 4, 2024

Indonesia bans coal exports in January fearing widespread blackout

By Priti Naik

Amid concerns over low supplies at domestic power plants could lead to widespread blackouts, Indonesia in January banned coal exports in the country. Indonesia is the world’s largest exporter of thermal coal, which exports around 400 million tonnes in 2020, majorly exporting to countries like China, India, Japan and South Korea.

Indonesia has a Domestic Market Obligation (DMO) where the coal miners should supply 25% of their annual production to the state utility Perusahaan Listrik Negara (PLN) at a maximum price of $70 per tonne. The rate is below the current market prices.

Ridwan Jamaludin, director-general of minerals and coal at the energy ministry, said, “Why is everyone banned from exporting? It’s beyond us and it’s temporary. If the ban isn’t enforced, almost 20 power plants with the power of 10,850 megawatts will be out.” He further added saying, “If strategic actions aren’t taken, there could be a widespread blackout.”

Ridwan said that the coal supplies to power plants each month were below the DMO, so by the end of the year, there was a coal stockpile deficit. He added that the ban would be evaluated after January 5.

Meanwhile, the Indonesian Coal Mining Association (ICMA) called on the energy minister asking him to revoke the export ban. In a statement given by ICMA, it said that the policy was hastily taken without been discussed by the business players. Its Chairman Pandu Sjahrir said that the widespread ban on export is likely to disrupt the monthly coal production volume of around 38-40 million tonnes. And in recent years, Indonesia has exported about 30 million tonnes of coal in the month of January. The association said it was also concerned about potential disputes with buyers if coal producers declared force majeure for not being able to deliver coal exports.

According to an industry analyst, Ahmad Zuhdi Dwi Kusuma, at Bank Mandiri, the ban would push global coal prices higher in coming weeks as stockpiles decline. This would make Indonesia’s customers to turn to Russia, Australia or Mongolia. “In the midst of this global uncertainty, the market often seeks the safest partners,” he said.

At present, China’s coal imports in November 2021, hit their highest level becoming the world’s biggest consumer of the dirty fuel scrambled to feed its power system as the winter heating season kicked in. But Beijing had also ordered miners to boost production.

In August 2021, Indonesia suspended coal exports from 34 coal mining companies it said failed to meet domestic market obligations between January and July last year. Indonesia is among the top 10 global green house gas emitters and coal makes up around 60% of its energy sources.

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