Indonesia’s new partial ban on coal exports will impact EU and bulk carriers
For the second time this year, Indonesia has banned the export of coal, saying it falls short of its national targets. While the current decision is only a partial ban against some minors, it nevertheless comes at a difficult time, raising concerns both in the bulk carrier community and particularly in Europe, where the EU’s phased ban on Russian energy expanded this week to include a total Russian ban. coal imports.
Indonesia’s Minister of Energy and Mineral Resources announced the latest round of bans on Aug. 10, saying miners had failed to meet the target of selling 25% of mined coal domestically. The obligation is one that Indonesia says is necessary to maintain the domestic supply of coal, which is one of the main sources of energy.
In early 2022, Indonesia announced it was suspending all thermal coal exports citing a domestic shortage. At the time, the Department of Energy said coal stocks at 20 public and private power stations were running low, which risked causing blackouts for up to 10 million customers. The Indonesian government tightly regulates its coal exports and controls the price of coal. Companies that do not follow the rules can be banned from the export market.
This week, the Minister for Energy and Mineral Resources argued that 71 coal miners had failed to meet their domestic market obligations. The ministry said 48 of the miners would now be banned from exporting coal while the Indonesian Coal Mining Association immediately challenged the ban.
“Despite lawmakers’ concerns about dwindling domestic coal stocks, another outright ban on all coal exports remains unlikely at this time,” said Niels Rasmussen, chief shipping analyst at BIMCO. above 4.5 million tonnes, a level considered safe.
Any prolonged disruption to coal shipments, however, could be particularly difficult for Europe, which is scrambling to implement a ban on Russian coal imports while also seeking to build up stocks ahead of the coming winter months. The EU imported 39 million tonnes of coal from Russia in 2021, or 36% of EU coal imports. Indonesia had pledged to increase its exports to help fill the void in Europe.
With Russian gas exports also banned, several European countries have sought to use coal to make up for the gas shortage. The Netherlands and Austria, for example, have both announced plans to restart coal-fired power plants to make up for an anticipated gas shortage. Poland, while being the largest coal producer in the EU, imported more than eight million tonnes of Russian coal in 2021. This week it expected a third of its coal imports to arrive from Indonesia, while also striving to diversify its coal suppliers with shipments also from South Africa this week.
“Indonesia is the world’s largest coal exporter. In 2021, the country exported 441.5 million tonnes of coal, or 31% of global coal exports. All exports are transported by ship and in 2021 accounted for 8% of global dry bulk cargo demand,” Rasmussen explains.
Indonesian officials recently reported that the country’s mining sector grew by just over 4% in the second quarter of 2022, growth that has been attributed to rising demand for coal from abroad and particularly from Europe. .
Rasmussen predicts that the current problems in the coal market will cause China and India to buy more coal from Russia. He expects the changes could help reduce some of the demands on Indonesia, which has been China’s biggest supplier. It also predicts that changes in supply patterns will increase the average sailing distance for global coal shipments and overall demand for bulk carriers in the coming months.