The price of coal on the Newcastle (Australia) ICE market closed at US$ 170/ton. A fall of 3.95% compared to the closing position of trading last weekend. In the previous trading, coal prices decreased by 1.67%. In two trading days, the price of this commodity fell 5.55%. This happened when the government of Indonesia, President Joko Widodo announced a policy that shocked the world. Indonesia banned coal exports for a month to ensure sufficient domestic demand, especially for power plants.
Indonesia is the world’s largest coal exporter. Many countries depend on coal supplies from Indonesia, such as China 127.7 million tons, India 97.5 million tons, the Philippines 27.4 million tons, Japan 26.9 million tons, Malaysia 26.1 million tons, South Korea 24.7 million tons, Vietnam 17.8 million tons, Taiwan 17 million tons, Thailand 16.8 million tons, and Bangladesh 7.2 million tons. When the government announced the cessation of exports, coal prices rose three days in a row. During those three days, the increase was up to 18.85%. The absence of supply from Indonesia will make coal stocks in the world market run out.
However, the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan said that the Indonesian government is ready to reopen the faucet for coal exports. Currently, the supply of coal for domestic power plants is sufficient (Managed by PT PLN (Persero). “Everything is good, we have gradually increased the number of days from 15 days to 25 days, for reserves,” Luhut said. As a result, prices are gradually falling.
Wow! Coal Price ‘Flying’ 9%!
Previously on January 11, 2022, the price of coal had fluctuated due to the floating policy of the Indonesian government. Currently, the price of coal has increased significantly again. The increase in coal prices was more than 9%. Yesterday, the price of coal on the Newcastle (Australia) ICE market closed at US$ 189.75/ton. Soared 9.56% from the previous day’s closing position. In the last two days, coal prices rose sharply. On January 12-13, 2022, the price of coal soared to 12.88%.
It seems that news from Indonesia is again the main cause of coal price driving. The Indonesian government confirmed that coal exports were still closed, the ban had not been lifted. “We will released it gradually. Anyway, if it meets the criteria, it will be released,” said Jodi Mahardi, Spokesperson for the Coordinating Ministry for Maritime Affairs and Investments. The government also provides conditions that must be met if the company wants to export.
- First, companies that have fulfilled sales contracts to PT PLN (Persero) and are required to supply 100% of domestic needs (Domestic Market Obligation/DMO) in 2021 will be allowed to start exporting this year.
- Second, coal companies that already have a contract with PT PLN (Persero) but have not fulfilled their contractual obligations and the DMO for 2021, must fulfill the obligation of fines in accordance with the Decree of the Minister of Energy and Mineral Resources Number 139 of 2021.
- Third, for companies whose coal specifications do not meet PLN’s needs or do not have a contract with PLN in 2021, they will also be subject to a fine with the same mechanism according to the Decree of the Minister of Energy and Mineral Resources Number 139 of 2021, based on the volume of DMO allocation given to each company.
Indonesia’s policy regarding coal has indeed greatly influenced and moved prices. Understandably, Indonesia is the number one coal exporter in the world.