Indonesia’s coal supply crunch over, minister tells local media

Author of the article: JAKARTA — Indonesia’s power emergency, which has triggered a coal export ban rocking global energy markets, is over and the government is reviewing a new formula for its mandatory domestic sales policy, a senior cabinet minister told local media on Friday. The world’s biggest thermal coal exporter suspended coal exports on…
Indonesia’s coal supply crunch over, minister tells local media

Author of the article:

JAKARTA — Indonesia’s power emergency, which has triggered a coal export ban rocking global energy markets, is over and the government is reviewing a new formula for its mandatory domestic sales policy, a senior cabinet minister told local media on Friday.

The world’s biggest thermal coal exporter suspended coal exports on Jan. 1 after Indonesia’s state power utility reported dangerously low inventory levels of coal, putting Southeast Asia’s biggest economy on the brink of widespread power outages.

Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan, after meeting with coal miners and other authorities on Thursday, told CNBC Indonesia and other local media that the talks had helped head off the immediate crisis.

“The discussions were split into two, the (coal supply) fulfillment now and a permanent solution. For now the emergency is over,” Luhut said.

He said his ministry would review the formula for the so-called domestic market obligation, which requires miners to sell 25% of production at a maximum price of $70 a tonne to local power generators, and aimed come to a decision the same day.

The reports did not give details of the new formula and it was not clear whether the export ban would immediately be eased.

The ministry declined to comment on details of the meeting.

The ban drove coal prices in China and Australia higher this week, while scores of vessels slated to carry coal to major buyers such as Japan, China, South Korea and India have been in limbo off Kalimantan, home to Indonesia’s main coal ports.

“We are watching closely the development of the talks between the local coal industry and Indonesian government,” said a spokesperson for JERA, Japan’s biggest power generator.

“In the event of a prolonged ban, we will procure coal flexibly through our global trading subsidiary,” the spokesperson said, adding that Indonesian coal accounted for about 19% of its total procurement in the last financial year.

The Japanese embassy in Jakarta made a request in a letter this week to Indonesia’s energy ministry that high-calorific coal which is not used by local power plants be excluded from the export ban.

The embassy also asked that five vessels already loaded with coal be allowed to depart for Japan.

“We assume that the coal export measures will be eased as soon as Indonesia’s state-owned power company PLN secures the required quantity of coal,” said a spokesperson for J-Power, another Japanese power generator.

As of Wednesday, PLN said it has secured 13.9 million tonnes of coal but needed 20 million tonnes for a safe 20-day stock.

Meanwhile, coal traders in China, the world’s top consumer and importer of the fuel, have also shrugged off the export ban, saying utilities already hold hefty stockpiles with power demand set to weaken for the Lunar New Year holidays.

(Reporting by Fransiska Nangoy, Bernadette Christina Munthe; Additional reporting by Yuka Obayashi in Tokyo; Editing by Ed Davies and Edmund Blair)

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