Japan urges Indonesia to revoke coal ban as exporters remain in limbo

Jakarta’s stranglehold over local coal supplies has driven a wedge into the free market economics of the global coal trade as miners and Indonesian authorities weigh up an export ban.

Other major importers like China and South Korea were able to shrug off the ban due to healthy local stockpiles and the availability of alternative sources.Shortages at state power company Perusahaan Listrik Negara had triggered the ban after local miners failed to meet their Domestic Market Obligation , which is to supply 25 per cent of their production to PLN before exports.

Indonesia’s DMO policy requires coal miners to supply 25 per cent of their annual production to PLN at no more than US$70 a tonne before exports. “In addition the record low coal prices that we saw in 2020, when Covid-19 weighed on global industrial activity and demand for commodities such as coal, also had an impact in that it forced a number of miners to reduce output.

The supply crunch in Indonesia was exacerbated by miners looking to profit from high coal prices as well as other inefficiencies in the DMO policy, said Mamit Setiawan, executive director at the non-profit group Energy Watch. By January, miners were supplying less than 1 per cent of the 5.1 million metric tonnes of coal needed by domestic generators for the month.

In a choice between maintaining the country’s trade revenues and protecting energy security, Widodo would probably lean towards the latter, said Siwage Dharma Negara, senior fellow and co-coordinator of ISEAS-Yusof Ishak Institute’s Indonesia Studies Programme. Manish Gupta, senior analyst at commodities and energy consultancy Wood Mackenzie, said that the PLN was more than able to replenish the expected shortfall of 5.1 million tonnes.

Source: News Formal (newsformal.com)

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