Indonesia eases coal export ban that rattled global market

Workers walk near a tugboat carrying coal barges at a port in Palembang of Indonesia's South Sumatra province, on Jan 4, 2022. - Reuters

JAKARTA (AFP): Indonesia, the world's top exporter of thermal coal, on Monday (Jan 10) said it would ease a ban on exports of the fuel that it imposed to head off looming blackouts.

Fourteen ships loaded with coal and destined for overseas markets would be allowed to leave Indonesia, Coordinating Minister Luhut Pandjaitan said in a statement.

But all other barges with coal for export must divert their cargo to power stations in need of supply, the statement said, adding that the government will re-evaluate exports on Wednesday.

The Jan 1 ban on shipments of coal used in power generation threw the market into disarray.

Prices of the fuel lurched higher as ships laden with hundreds of thousands of tonnes of the mineral destined for major markets in Japan, China and India sat in ports and all new production was diverted to domestic power stations.

The Philippines has urged Indonesia to lift its ban, with Manila warning on Monday the policy would have a "detrimental" impact on the coal-reliant country.

Japan issued a similar appeal last week.

Indonesia's export ban was imposed after coal miners failed to meet their obligation to set aside 25 per cent of output for the domestic market.

Analysts and coal producers blamed mismanagement at Perusahaan Listrik Negara (PLN), the country's state-owned utility, which allowed reserves to fall to as low as three days' supply at some power plants.

Of the 5.1 million tonnes called for by the government this month, only 35,000 -- or less than 1 perc ent -- had been supplied, the ministry said on Jan 1.

Even if current acute shortages are eased, analysts have said Indonesia faces long-term structural supply constraints because exporters have little financial incentive to supply the domestic market.

They are forced to sell to the state at a price far below current market rates, analysts said.

"Coal producers do not consistently play by the rules, while at the same time the government does not have a mechanism to control whether the need for coal at PLN has been fulfilled," said Marwan Batubara, director of the Indonesian Resources Studies think tank.

"There is no supervision. There is no mechanism to ensure that each power plant has enough supplies," Batubara said.

To remedy this, Luhut said coal supply contracts would now include freight and delivery.

"Logistics and delivery arrangements become the responsibility of the coal suppliers and PLN can focus on its core business to provide reliable electricity," the statement said.

PLN must also buy only from coal producers with a commitment to compliance, not traders, and increase the unloading capacity at its power plants, it said.

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