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Indonesia to improve coal delivery checks as export ban weighs on economy

By on January 14, 2022 0

JAKARTA – Indonesian utility Perusahaan Listrik Negara (PLN) said on Friday that together with the Ministry of Energy, it is strengthening a coal delivery monitoring system to ensure domestic sales rules are enforced and safety energy.

The world’s largest exporter of thermal coal introduced an export ban on January 1 as coal stocks at local power plants were at critically low levels amid weak compliance with a so-called government bond. internal market (MDG).

Under the DMO, miners must sell 25% of their production on the local market with a cap price of $70 per ton for power plants, below the current market price.

Coal deliveries to local power plants will be monitored throughout the supply chain by PLN and the Department of Energy’s Minerals and Coal Department, and miners will receive automated warnings for any late deliveries.

“I hope this will contribute to the security of PLN’s coal supply,” the managing director said. Darmawan Prasodjo noted.

A senior minister said on Thursday that 37 export ships laden with coal would be allowed to leave and that miners who met their 2021 DMO would be given priority for exports.

Eighteen of these ships have been cleared by the Department of Energy, carrying around 1.3 million tonnes of coal, according to a Department of Transportation document reviewed by Reuters.

This is only a fraction of the normal export volume of Indonesia, which shipped 30 million tonnes of coal in the month of January in 2021 and 2020, according to data from the Ministry of Energy.

Sixteen other vessels were carrying coal from miners who had not met the DMO and therefore had not yet cleared customs, while three were still loading, according to the ministry document.

“If the Ministry of Energy and Mineral Resources has not cleared them, there will be no clearance,” said Mugen, an official with the transport ministry. Suprihatin Sartoto said Friday.

HARMFUL EFFECT
As Indonesia has begun to ease its coal export ban, the abrupt suspension may already have left a scar on the sector and the wider economy, highlighting the risk of regulatory uncertainty and impacting on Indonesia’s trade balance.

“The biggest and most immediate implication of the coal export ban is on Indonesia’s current account balance, which we already expect to move into a deficit this year,” Nomura said in a note. Thursday.

Indonesia in the third quarter of 2021 posted a 1.5% current account gross domestic product surplus, the largest in 12 years. The central bank estimated a current account balance for the full year between a surplus of 0.3% of GDP and a deficit of 0.5% of GDP.

Coal accounted for 14% of total merchandise exports in 2021, so if the export ban applied for the whole month of January, Nomura said, total merchandise exports could be reduced by about $4 billion. , enough to shift the trade balance from a surplus to a deficit.

“In addition, we believe that the concerns expressed by major trading partners, Japan and Korea, are also likely to carry significant weight, given the Indonesian government’s efforts to attract foreign direct investment,” Nomura said. .

Easing the ban would be positive credit for miners who likely complied with their DMO requirements, as they could sell coal overseas at prices 2.5 times higher than domestic prices, said Maisam Hasnain, analyst at Moody’s Investor Service.

Moody’s previously said the ban “highlights evolving regulatory uncertainty for the industry.”