Indonesia, the world’s biggest exporter of thermal coal, made an unexpected decision that shocked global energy markets this week by suspending fuel exports in January due to a shortage of coal for its domestic power plants.
The position of coal in Indonesia’s energy mix reaches around 60 percent. The Ministry of Energy and Mineral Resources said that in early 2022, PLN would only get a supply of 35,000 tons of coal.
PLN in November estimated it would need 119 million tonnes by 2022.
The Ministry of State-Owned Enterprises said it was encouraging PLN to improve supply management and increase long-term procurement contracts.
In the short term, the Indonesian Coal Miners Association said its ten largest members would provide additional supplies to PLN.
Coordinating Minister for Maritime Affairs and Investment, Luhut Pandjaitan, after meeting with coal miners and other authorities on Thursday (6/1), told local media that the state of emergency was over and his ministry would review a new “formula” for regulation of domestic market obligations ( DMO) and take a new decision at a meeting on Friday.
Indonesia requires coal miners to sell 25 percent of their production locally at a maximum price of $70 per tonne for power generation.
Meanwhile, government-set benchmark export prices have surged since early 2021, peaking at $215 per tonne in November, due to the global energy crisis.
According to the minutes of the meeting of miners and the Ministry of Trade this week, there were 418 miners who did not sell any of their coal to local power plants last year.
In August, the Ministry of Energy and Mineral Resources suspended the export permits of dozens of miners.
Bahana Securities Research said in a note that as long as there is a wide gap between DMOs and global market prices “this tug-of-war between governments and small miners could continue.”
Where Do Indonesian Coal Exports Go?
China, India, Japan and South Korea are typically major buyers of Indonesian coal, and together account for 73 percent of its exports in 2021, according to Kpler ship tracking data.
Neighboring countries in Southeast Asia such as the Philippines and Vietnam are also potential markets for Indonesia.
Indonesia’s export revenue from coal stands at around $3 billion per month, and was one of the main drivers behind the country’s record exports last year.
Japan, which imports 2 million tons of Indonesian coal per month, wrote a letter to the Minister of Energy and Mineral Resources asking for the ban on exports of high-calorie coal to be lifted. The country noted that Indonesia’s power plants use coal with low calorific value.