Two ministers have said that state-owned electricity company PLN had secured enough coal to meet its power generation needs, addressing the underlying issue behind Indonesia’s coal export ban that has rattled global markets.
“Right now, there seems to be no problem [with supplies], the emergency is over,” Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan told reporters in Jakarta on January 6.
Luhut had met with coal mining companies and several ministries on January 6 to review the coal export ban, but had not made a decision on the matter.
Indonesia, the world’s biggest exporter of coal used in electricity generation, announced a monthlong ban on coal shipments starting January 1 to address a shortage in PLN coal supplies that risked causing widespread blackouts, wrote the Ministry of Energy and Mineral Resources in a statement.
The ministry said 20 coal-fired power stations with a combined generation capacity of 10,850MW were at risk of outage because of low coal stocks.
The government blamed the shortage on coal producers’ failure to comply with the domestic market obligation (DMO) that mandated that a quarter of each producer’s output be set aside for domestic needs, with prices capped at $70 per tonne.
Concurring with Luhut, State-Owned Enterprises (SOE) Minister Erick Thohir on January 6 said PLN’s coal supply was “sufficient” to meet regular needs, but he reiterated PLN would still have to come up with a long-term solution to ensure supply continuity.
The ministry had warned PLN about coal supply disruptions since January 2021, when domestic coal production declined and deliveries were disrupted amid the Covid-19 pandemic.
Indonesian Coal Mining Association (APBI) executive director Hendra Sinadia declined on January 7 to comment on the matter, saying “there has yet to be any confirmation from the government”.
PLN on January 5 said it needed to secure 20 million tonnes of coal to ensure supply for 20 days and had secured 13.9 million tonnes as of that day.
Major Indonesian mining companies said they were ready to commit to a combined domestic supply of 2.9 million tonnes of coal in the hope that it would lead to the early revocation of the ban on thermal coal exports, sources involved in the negotiations said, as reported by S&P Global Platts on January 4.
“A full-month ban is unnecessary and unlikely to be implemented, as long as the coal supply quota has been met,” Yose Rizal Damuri, a lead economic researcher for the Jakarta-based Centre for Strategic and International Studies (CSIS), said on January 6.
Similarly, Ahmad Zuhdi Dwi Kusuma, an industry and regions analyst at state-owned Bank Mandiri, did not rule out the possibility of the government lifting the export ban before the end of this month, given that not all coal miners flouted the DMO.
Prior to the onset of the ban, the coal quota sold domestically – for both PLN and other companies – had only reached 35,000 tonnes, less than one per cent of the 5.1 million tonnes assigned by the government for the month, said the energy ministry in the statement.
China’s thermal coal futures surged by as much as 7.8 per cent on January 4 over concerns of supply disruptions after Indonesia, its biggest overseas supplier, banned exports.
The Japanese embassy in Jakarta urged the energy ministry on January 5 to lift the shipment ban for high calorific coal, saying “the sudden export ban has a serious impact on Japan’s economic activities as well as people’s daily life”.
The embassy added that at least five vessels already loaded with coal should immediately be granted departure permits.
South Korea joined the fray on January 7, when trade minister Yeo Han-koo met counterpart M Lutfi via video conference.
“Trade minister Yeo delivered the government’s concerns about Indonesia’s coal export ban and strongly requested the Indonesian government’s cooperation for a prompt resumption of coal shipment,” the ministry said in a press release.
Asia’s economic powerhouses China, India, Japan and South Korea are the biggest buyers of Indonesian coal, collectively receiving 73 per cent of Indonesian coal exports in 2021, ship-tracking data from data intelligence firm Kpler show.
Publicly listed Indonesian coal mining giants have also informed shareholders that they were considering declaring force majeure to avoid penalties and demurrages. The giants include Bumi Resources, Adaro Energy, Indika Energy and Bukit Asam.
THE JAKARTA POST/ASIA NEWS NETWORK