Original title: Announcement of the news|Indonesia’s suspension of coal exports, what impact will it have on the country and abroad?
On January 1, local time, Ridwan Jamaludin, a senior official of the Indonesian Ministry of Energy, announced that Indonesia would ban coal exports in January in response to a large-scale blackout caused by insufficient energy supply in domestic power plants. The analysis pointed out that since Indonesia is the world‘s largest exporter of coal for power generation, this will have a significant impact on the world‘s energy structure. This policy also quickly aroused negative feedback from Indonesian domestic coal companies.
According to a report by the British Broadcasting Corporation (BBC) on January 4, Indonesian President Joko Widodo explained on January 3 that coal and natural gas producers should prioritize domestic market demand rather than export.
The Indonesian Coal Mining Association (ICMA), which is deeply affected by its interests, criticized the new policy for “hastily” and called on the Ministry of Energy to revoke the export ban. Reidwan stated that the policy will be re-evaluated after January 5. Due to the swing of Indonesian official policy, dozens of coal ships waiting for the result of the ban have been stranded on the coast of the country.
According to Indonesia’s “Media Indonesia” (Media Indonesia) on January 6 quoted the Indonesian Coal and Energy Suppliers Association (Aspebindo) President Anggawira (Anggawira) reported that starting from January 6, “domestic market obligations will be fulfilled.” “(DMO) coal producers with a level of 76% or more are allowed to export coal again. Angavira also supports the government’s prohibition of coal exports from coal producers that do not meet DMO requirements.
Why is this so?
The so-called “domestic market obligation” policy in Indonesia started in 2018. According to this policy promulgated by the Indonesian government, coal companies must supply 25% of their annual output to Indonesia’s National Electric Power Company (PLN), with a maximum price of US$70/ton (approximately RMB 445/ton)-much lower than the market. price.
Indonesia is the world‘s largest exporter of thermal coal, with an export volume of approximately 400 million tons in 2020. According to the BBC citing data from the Ministry of Energy, Indonesia’s thermal coal benchmark price (HBA) rose for eight consecutive months last year, exceeding US$210/ton in November, three times the government price limit; even if the HBA fell to RMB 160/ton in December last year Ton, which is still more than twice the price set by the Indonesian government.
At the same time, global coal demand continues to rise. Agence France-Presse reported on the 1st to quote the International Energy Agency as saying that economic growth after the new crown epidemic has driven global demand for coal to a record high in 2021, and the high demand will continue until 2022. The widening price difference between domestic and foreign coal has caused Indonesian coal companies to be unwilling to supply coal to the country and prefer to export.
According to official data, Indonesia’s domestic coal supply tends to be tight. According to a Reuters report on January 1, Ridwan said that the monthly coal supply obtained by many power plants in Indonesia was lower than DMO, which led to a shortage of coal reserves in Indonesia at the end of last year. Ridwan said that without this temporary “strategic action” (pointing out the oral ban), a large-scale blackout would occur across Indonesia.
Therefore, the “insufficient coal” in Indonesia is not caused by resource shortage: coal is exported in large quantities under the influence of the price policy, and thus is insufficient to supply the country.
Policies affect the interests of all parties in Indonesia and abroad
Once the ban was issued, it aroused opposition and criticism from all walks of life in Indonesian society. According to a report by the “Futures Daily” on January 3, the Indonesian coal industry complained about the export ban, believing that it may trigger commercial disputes between coal companies and international buyers, and damage Indonesia’s reputation as a world coal supplier. .
According to a report by BenarNews on January 3, the chairman of the Indonesian Chamber of Commerce and Industry, Arsjad Rasjid, believes that it is unfair to prohibit Indonesian companies from exporting coal “all-in-one” because some companies have already completed the export of coal. Indonesia’s national power company’s coal supply requirements. Some analysts believe that the price of Indonesian coal companies supplying coal to domestic power companies is too low, and it is still a “normal corporate profit-seeking behavior” to tilt the supply toward exports.
Despite this, the Indonesian official attitude is still tough. In explaining the coal export ban on January 3, Joko Widodo emphasized that coal companies should give priority to domestic demand. If companies fail to meet relevant government regulations, their production licenses will be revoked.
According to a report by The Diplomat on January 4, the coal export ban has allowed the Indonesian government to maintain retail electricity prices at a low level, and Indonesian people can also be protected from global coal price fluctuations. Under the DMO policy framework, the Indonesian Ministry of Energy has authorized manufacturers to give priority to PLN to meet lighting needs.
According to a Reuters report on January 4, PLN had received approximately 700,000 tons of additional coal supply on that day. The company said that although it has received additional supplies, its goal is to reach the minimum level of use of reserves for 20 consecutive days. As for how much coal is needed to reach the expected reserve level, a PLN spokesperson said that he could not immediately respond. Previously, PLN had stated that it would need about 5.1 million tons of coal in addition to the original quota in January this year to avoid a large-scale blackout.
At the same time, as an important coal exporter for countries in East Asia, South Asia, and Southeast Asia, Indonesia’s export ban has caused dissatisfaction or doubts among the purchasing countries.
Reuters reported that the Japanese Embassy in Jakarta on January 5 urged the Indonesian Ministry of Energy to lift the relevant ban in the face of strong demand for electricity in Japan in winter. “The sudden export ban has had a serious impact on Japan’s economic activities and the daily lives of its citizens.” The Japanese Embassy wrote in a letter that the Japanese side requested that the five cargo ships that have completed coal loading should immediately obtain permission to leave the country. The Japanese Embassy in Indonesia also added that Japan imports about 2 million tons of coal from Indonesia every month.
Indonesia is also China’s largest coal importer. According to the “Futures Daily” report on January 3, in the first 11 months of 2021, China imported a total of 292,321 million tons of coal, an increase of 10.6% year-on-year, an increase of 8.7% over the previous 10 months. Among them, Indonesia exported 178 million tons to my country, accounting for about 61%.
According to BBC reports, Guosheng Securities’ coal team analyst Zhang Jinming estimates that China imported approximately 16 million tons of thermal coal per month from Indonesia last year. If Indonesia bans coal exports, it will affect 5.3% of China’s effective thermal coal supply. Bloomberg quoted Morgan Stanley analyst Sara Chan as saying that China’s winter heating demand has peaked and domestic coal production has set a record. However, the current increase in coal inventories in power plants in China has a certain buffer against the Indonesian ban.
Bank Mandiri industry analyst Ahmad Zuhdi Dwi Kusuma said the ban will push up global coal prices in the next few weeks as coal reserves are declining. , Indonesia’s coal exporters may turn to Russia, Australia, Mongolia and other countries to purchase.
Ban highlights Indonesia’s energy transition dilemma
“The Diplomat” reported on January 4 that the coal export ban officially launched by Indonesia and related industry disputes highlighted the political and economic importance of coal in Indonesia. According to reports, coal power accounts for 60% of Indonesia’s energy; coal also accounts for 35% of Indonesia’s carbon emissions, second only to deforestation.
Indonesian President Joko Widodo attended the United Nations Climate Change Summit (COP26) in November last year and promised at the meeting that Indonesia will stop operating new coal-fired power plants, phase out coal-fired power generation by 2056, and get rid of coal-fired power generation by 2060 or earlier. Coal to achieve carbon neutrality.
Indonesia’s dependence on coal is an energy structure that poses a challenge to any renewable energy transition in the country. Reuters reported on January 6 that although Indonesia has many islands and abundant sunshine all year round, Indonesia ranks the lowest among the G20 countries in terms of solar power generation capacity.
James Guild, an expert on economics, trade and development in Southeast Asia, once published an article in November last year that although Indonesia has environmental ambitions, the application of renewable energy has been very slow. In 2020, approximately 87% of Indonesia’s electricity will come from coal, oil or gas power plants, 12.7% from hydroelectric and geothermal power generation, and only 0.3% from renewable energy sources such as solar, wind and biomass gasification.
The “Diplomat” article pointed out that the Indonesian coal industry received 38 billion U.S. dollars worth of export proceeds from January to July 2021. The Indonesian government also obtained political benefits from ensuring a stable and low-cost power supply. This reliance on coal, The slow energy pattern of renewable energy transition is not surprising. “They control the supply and thus control the price. This will not be easily given up by them.” Gilder wrote, “In a country like Indonesia, any reliable plan to start renewable energy must deal with these political and economic realities.”
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