Indonesia’s state-owned company on Tuesday secured an extra 7.5 million tonnes of coal supplies, which helped prevent power outages, increase supplies and increase the chances that the government will soon lift its export ban.
The island nation, the world’s leading exporter of coal used in power plants and China’s largest overseas supplier, announced a ban on exports on Saturday in January to avoid interruptions to domestic generators.
The move has pushed up coal prices in China, although Indonesian authorities will reconsider the ban on Wednesday.
State utility company Perusahaan Listrik Negara (PLN) said that although it had secured the additional stock, it aimed to continue to increase stock to a minimum level of use of 20 days.
“Coal-fired power plants that are in crisis are starting to see their supply issue resolved,” PLN chief executive Darmawan Prasodjo said in a statement.
A PLN spokesperson could not immediately comment on how much more PLN inventory is needed for the intended inventory level. PLN previously said it needed 5.1 million tonnes of additional supplies for January to avoid widespread disruptions.
Pandu Sjahrir, chairman of the Indonesian Coal Miners’ Association (ICMA), said the group’s 10 largest members would help PLN close the supply gap as a “very short-term solution”.
A full-month ban could be averted by such coordination, says Rory Simington, chief analyst for Asia-Pacific coal research at Wood Mackenzie.
“A strike in Indonesia’s exports will have a major impact on thermal coal markets, but a total ban for January is unnecessary and in our opinion is unlikely to be implemented,” Simington said.
“We expect 40 million tons of Indonesian exports in January and the total domestic demand is in the region of 12 million tons; Addressing any shortfall will only require a fraction of the total capacity, ”he added.
ICMA said in a statement on Tuesday that the group is in talks with the government to resolve the issue and is working with members to meet domestic obligations.
“We are optimistic that the supply shortage in some power stations will be resolved soon and we hope that exports can be gradually reopened,” it said.
The group said distribution was affected by difficulties in securing vessels to transport coal to the state utilities.
“The main obstacle in the field that hinders the acceleration of supply distribution is the availability of pickups,” it said.
Coal futures in China, the world’s largest consumer of fuel, rose on Tuesday in a sign of concern that the export ban could threaten energy security in some of the world’s largest economies.
China’s benchmark thermal coal futures contract rose as much as 7.8 percent in the first day of trading since the policy was announced. Futures closed at 713.80 yuan ($ 112) per tonne, up 6.4 percent.
It was the most important daily rise since October 19, when prices climbed to a record 1,848 yuan ($ 291) per tonne amid a supply shortage in China caused by domestic mine shortages.
If it continues after Wednesday’s review, Indonesia’s ban could push China to reconsider unofficial import restrictions it has placed on Australian coal.
“If Indonesia’s coal export ban were to be extended, China would have to turn to Australian coal again, with the latter a major beneficiary of Indonesia’s coal export ban,” said Sabrin Chowdhury, an analyst at Fitch Solutions, part of Fitch Group.
Some smaller miners in Indonesia have declared force majeure on their shipments, the legal term for when a supplier is unable to fulfill a contract due to forces beyond their control, coal traders in Singapore and India said on Tuesday.
The firms that declared the force majeure were mostly those that did not meet the so-called domestic market obligation (DMO), a coal mine manager in Jakarta said.
According to the rule, miners must sell 25 percent of their output to local power plants at a maximum price of $ 70 per tonne.
Indonesian President Joko Widodo on Monday threatened to withdraw the business permits of miners who did not meet their DMO requirements.
Asia’s economic power stations, China, India, Japan and South Korea, together received 73 percent of Indonesian coal exports by 2021, Kpler’s ship tracking data showed.