Out-Law News 1 min. read

Indonesia bans coal exports over domestic supply concerns

Indonesia has announced a temporary ban on coal exports from 1 to 31 January 2022 to avoid outages at domestic generators.

The ban was issued after coal miners failed to meet their domestic market obligation (DMO). This requires them to supply 25% of their annual production to state-owned electricity company PT PLN at a maximum price of US$70 per metric tonne.

Renewables expert John Yeap at Pinsent Masons said: “Whilst the commitment to meet domestic targets needs to be fulfilled, there is no doubt this move will have an impact on Indonesia’s reputation as a leading coal exporter. The period of the ban is short, and with most power stations having coal stocks and perhaps diversified coal procurement strategies, the impact may be limited.  Nevertheless, consequences for future coal procurement will undoubtedly be affected.”

According to Indonesia's president Joko Widodo, companies that are unable to fulfil their domestic supply obligations may be subject to sanctions. He said those companies should not be getting export permits and their business licences should be revoked.

Indonesian Ministry of Energy and Mineral Resources (ESDM) mineral and coal director general Ridwan Jamaludin said that the temporary export ban would prevent the closure of 20 power plants which provide a total of 10.9 gigawatts (GW) of electricity.

The Indonesian Coal Mining Association (APBI) said that the temporary ban on coal exports would lead to financial losses for firms including a reduction in sales, inflated logistics costs and undermining Indonesia’s credibility as the world’s top exporter of thermal coal.

APBI Director Hendra Sinadia said ships that were ready to transport coal may charge producers for additional storage costs of approximately “US$20,000 to US$40,000 per ship" per day.

China's benchmark thermal coal futures rose by as much as 7.8% in the first day of trading since the policy was announced, according to Reuters.

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