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Indonesia resumes coal exports

ahead of industry review

GLOBAL INDONESIA resumed coal exports on January responsibility of the supplier. This will allow PLN
10 as supplies to domestic power plants returned to focus solely on power generation and trans-
to lows, with the government allowing an initial mission. PLN is also tasked with buying coal
14 vessels loaded with coal to depart. only from producers that have their own mines
The disruption has also prompted the gov- and not from trading firms. This will be done
ernment to look at changing the domestic cur- through long-term supply contracts to ensure
rent coal supply system in order to prevent future ample supplies to PLN’s power plants.
shortages and to maintain exports. All coal contracts to PLN and independent
“As of today (January 10), after seeing a much power producers (IPPs) this year will be evalu-
better supply condition at PLN, 14 vessels that ated along with the monthly allocation for each
have already been fully loaded with coal, and coal supplier and their respective coal plant des-
have been paid [for] by the buyers, can be imme- tination. This evaluation will be done monthly
diately released for export,” Luhut Pandjaitan, by a cross-ministerial team comprising the mar-
the Coordinating Minister of Maritime and itime affairs and investment, trade and energy
Investment Affairs, said in a statement. ministries.
Luhut added that the government would now Indonesia is the world’s largest exporter of
conduct a review as to whether to end the ban thermal coal, exporting 400mn tonnes in 2020.
altogether. If it does, he said, it would be phased The ban had an immediate upward impact on
out gradually in order to ensure that domestic the global price of coal.
coal supply rules are met, known as the Domes- It also prompted protests from industry
tic Market Obligation (DMO). groups and foreign governments that rely on
The Indonesian government announced a imports of Indonesian coal to supply their own
ban on thermal coal exports on January 1, say- power plants.
ing initially it would last until the end of the The Indonesian Coal Mining Association
month, after supplies at domestic power plants (APBI) welcomed the development, Argus
fell to critically low levels. This government was reported, saying that the lifting of the ban will
eager to avoid widespread power shortages and allow coal-mining companies to fulfil their con-
blackouts. tractual obligations to foreign buyers.
“If the export ban is not implemented, nearly The APBI said that its members will comply
20 steam power plants with a power of around with the government’s decision and continue to
10,850 MW will be extinguished,” Ridwan fulfil the DMO quotas required of them.
Jamaludin, director-general of minerals and coal The DMO obliges coal miners in Indonesia to
at the ministry, said in the statement. supply 25% of annual production to the domes-
“This has the potential to disrupt the stability tic market at a price well below current market
of the national economy.” He added that once rates. Most of this goes to domestic power plants
the power plants have secured supplies, things run by the state-owned power utility Perusahaan
will normalise and coal will again be available Listrik Negara (PLN), which enjoys a complete
for export. monopoly on the transmission and distribution
When the ban was put in place at the start of of power. The purpose of the DMO is to override
January, PLN secured an extra 7.5mn tonnes of volatility in the international coal markets and
coal supplies, which boosted its domestic stock- ensure a steady supply of low-cost power to the
piles and paved the way for January 10’s decision Indonesian public.
to release the first 14 coal shipments, which had Japan’s embassy in Jakarta on January 5 urged
been paid for but were prevented from leaving the energy ministry to lift the export ban for
port. Luhut said in his statement that when high-caloric coal, which is not used by local gen-
exports are resumed permanently, Jakarta will erators, Reuters reported.
ensure that all of PLN’s coal supplies for this year “The sudden export ban has a serious impact
are secured within two weeks in order to mini- on Japan’s economic activities as well as people’s
mise the risk of further shortages. daily life,” the embassy said in a letter, adding at
Meanwhile, the Maritime Affairs and Invest- least five vessels already loaded should be given
ment Ministry has called on state agencies to immediate departure permits.
implement changes in the current system, Argus China, India, Japan and South Korea together
reported. received 73% of Indonesian coal exports in 2021.
It has directed PLN to change its coal pur- Of these, Japan and South Korea called publicly
chase arrangement from FOB to CIF so that for Indonesia to ease off on its ban, as did the
transport and logistics arrangements will be the Philippines.™

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