Heavy equipment is used to stockpile coal at the Kertapati coal terminal belonging to Indonesian state-owned company PT Bukit Asam in Palembang, South Sumatra, on Tuesday. Booming prices for primary commodities like coal buoyed Indonesian exports in 2021. ANTARA
Indonesia may not see in 2022 a trade surplus as large as in the past two years, as commodity prices are expected retreat from unusually high levels.
The country’s goods trade surplus in the January-to-November period of 2021 reached $34.32 billion, 58.74 per cent higher than the surplus seen in the entire 2020, Statistics Indonesia (BPS) data show.
Surging commodity prices drove the unusually large trade surplus during the pandemic as exports relied on resources like coal, crude palm oil (CPO), nickel and copper.
However, commodity prices are expected to be lower this year than in 2021, according to economists at publicly listed state-owned lender Bank Mandiri.
“We believe the trade surplus will tend to narrow in 2022,” Bank Mandiri economist Faisal Rachman said on January 11. “But if the imbalance in the global recovery persists, there is still a chance that prices will remain high.”
Commodity prices are expected to normalise this year as a result of rising supply, according to the economists, even as domestic consumption and raw material imports are projected to pick up as the national economy recovers.
Newcastle coal futures, for example, have shown signs of normalising after peaking at $269.50 per tonne on October 5, according to data published by economic data provider Trading Economics.
There was a recent upward blip in the benchmark, however, as the coal price went up 10.48 per cent to $174 per tonne on January 4 from a day earlier following Indonesia’s decision to ban coal exports this month to safeguard supplies for power plants. That was the highest level since November.
Bank Mandiri economists said coal prices surged last year in part because China had stopped importing the commodity from Australia as ties between the two countries worsened. This led to shortages in China, sending both local and global prices up. Moreover, there was an unexpected increase in demand from the electricity sector.
For CPO, a labour shortage in the business in Malaysia, a key exporter of the commodity along with Indonesia, caused the price to surge. Bank Mandiri economists said the lockdown in Malaysia in 2020 had caused CPO production to drop.
The CPO price was also on a downward trend after peaking at 5,446 ringgit per tonne ($1,300) in early November, according to data published by media outlet Business Insider. It stood at 5,308 ringgit on January 11, up 0.93 per cent from a day earlier.
Worldwide CPO production was forecast to grow by 4.9 per cent in 2022, outpacing expected consumption growth at 2.7 per cent, according to the US Department of Agriculture, which pointed to incoming pressure on prices.
Kathrina Ell, senior Asia-Pacific economist at financial intelligence firm Moody’s Analytics, said supply chain stress was forecast to continue easing in the first half of the year, citing improvements in indicators such as port traffic and supplier delivery times.
However, Ell said the Omicron coronavirus variant had increased uncertainty and had raised the risk that supply chain issues would worsen.
“Indonesia’s blistering trade surpluses are not expected to continue in 2022,” Ell told the Jakarta Post in an email on January 6. “But export values and therefore receipts will remain relatively elevated, which will be an important support to the broader economy.”
Shinta Kamdani, the deputy chairwoman of the Indonesian Chamber of Commerce and Industry (Kadin), said a slowdown in exports was nearly certain, not only because of normalising commodity prices but also sluggish growth in export productivity.
Shinta said exporters had plans to raise commodity shipments, but that would likely run up against a slowdown in demand for key commodities, including coal.
“We cannot determine yet how significant the slowdown in the export performance will be, because it hinges on the pandemic [impact] on fluctuating global commodity prices, logistics cost and demand,” Shinta told the Jakarta Post in a text message on January 6.
“On the domestic side, we also have to look at how the pandemic containment policy affects export productivity, export supply chain efficiency and the ease of obtaining financing for export.”
Centre for Reform on Economics (Core) Indonesia executive director Mohammad Faisal said this year’s surplus was expected to build on the growth in manufacturing exports, especially steel to China.
Faisal said other manufactured goods, such as textiles and footwear to the US, could also bolster this year’s exports.
“Manufacturing [sector exports] remain relatively good, although not in an even way, because many countries are expected to be able to control the pandemic in 2022,” Faisal said on January 6.
THE JAKARTA POST/ASIA NEWS NETWORK
