HIGHLIGHTS
- Indonesia’s coal export ban could threaten China’s energy security. This pushed coal futures prices in the world’s largest fuel consumer to a two-month high.
- The Indonesian Ministry of Energy and Minerals has issued an official dispatch to temporarily ban coal exports from January 1-31, 2022 for all coal mining and trading enterprises.
FULL ARTICLE
Coal prices soar to 2-month high
Indonesia’s coal export ban could threaten China’s energy security. This pushed coal futures prices in the world’s largest fuel consumer to a two-month high.
According to data from the Zhengzhou Exchange (China) on January 4, the price of thermal coal futures in May increased by 7.3% to 708 yuan (111.10 USD)/ton. At the end of the session, the price of thermal coal futures still increased by 5.5% compared to the previous session, the largest increase since November 25.
Similarly, on the Dalian bourse on January 4, the price of coking coal futures price in May rose 5.7% to 2,337 yuan ($367.74)/ton at the end of the session, in some sessions up to 2,370.50 yuan, the highest price since October 28.
Although Indonesia’s coal is not used for metallurgy, this important supply shortage will certainly have a significant impact on the coal market in general and spread to coal-intensive industries such as steel, electricity, etc.
Indonesia’s temporary ban on coal exports
The Indonesian Ministry of Energy and Minerals has issued an official dispatch to temporarily ban coal exports from January 1-31, 2022 for all coal mining and trading enterprises. The purpose is to ensure the supply for coal power plants and prevent the risk of electricity shortage for production and daily life in Indonesia. The Indonesian government said that when the domestic coal supply is fully met, coal producers will be able to resume export business.
Indonesia’s ban on coal exports in January is believed to be the cause of the tightening of coal supply in the Chinese market because China’s domestic coal mining output has reached a record high.
In November 2021, China produced 370.84 million tons of coal to ensure enough energy supply for the winter. However, this output is forecasted to decrease as power plants reduce the amount of coal to replenish their stockpiles while the government steps up activities to combat illegal coal mining.
In a joint report by Morgan Stanley and Marius van Straaten, analysts said any disruption to Indonesia’s thermal coal exports could lead to a rebound in world coal prices.
Besides, the announcement of a temporary suspension of the coal export ban also surprised the community of Indonesian coal production and export businesses. However, likely, the Indonesian Government will soon have to consider and adjust this decision due to pressure from the coal production and trading business community in this country.
Minh Ngo
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