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Govt’s bid to hike coal export prices faces global market backlash
Banking on its large share of the thermal coal market, Indonesia wants its domestic benchmark to inform international pricing, but importers are reluctant to go along, causing uncertainty for export deals.
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King coal: Barges piled high with coal are seen on Aug. 16, 2022, in waters near Samarinda, East Kalimantan. (AFP/Adek Berry)
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ndonesia wants its domestic coal price benchmark to inform international pricing for thermal coal, but as importers appear reluctant to go along, the move causes uncertainty for export deals.
Since March 1, the Energy and Mineral Resources Ministry requires thermal coal exporters to sell the commodity using Indonesia’s coal reference price (HBA) to prevent Indonesian coal from being sold abroad at prices below the local benchmark.
Fathul Nugroho, deputy chairman of the Indonesian Energy, Minerals and Coal Suppliers Association (Aspebindo), expects the new rule to cause a temporary drop in foreign demand for Indonesian coal by increasing the asking prices of Indonesian exporters.
“The new rule is causing uncertainty in the current coal export transactions,” he told The Jakarta Post on Tuesday.
The China Coal Transportation and Distribution Association said Chinese companies may try to cancel or renegotiate long-term contracts because of the new rule, as reported by Bloomberg on Feb. 28.
Importers from China are reportedly unwilling to agree to the new pricing scheme, as years of high domestic production and imports, coupled with weak winter demand, have led to excessive stockpiles, Bloomberg reported, adding that at least one major coal buyer has suspended spot imports of foreign coal to reduce inventories.
However, Indonesia might shift its coal exports to other countries, such as Malaysia, the Philippines, Vietnam and Thailand, as well as some South Asian countries, if Chinese importers were to terminate contracts because of the new rule, Fathul said.
