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Jakarta Post

Indonesia could lose coal buyers over regulation mandating use of local ships: APBI

  • News Desk

    The Jakarta Post

Jakarta   /   Mon, February 24, 2020   /   10:11 am
Indonesia could lose coal buyers over regulation mandating use of local ships: APBI Tug boats pull coal barges along the Mahakam River in Samarinda, East Kalimantan, on Dec. 31, 2017. Beginning May 2020, coal exporters will be required to use Indonesian-flagged ships. (Antara/Akbar Nugroho Gumay)

Indonesian coal miners may lose buyers because of a regulation that requires coal exporters to only use domestic shipping companies and insurance services, experts have warned.

The head of the marketing and logistics department at the Indonesian Coal Mining Association (APBI) Hendri Tan said that many overseas buyers would choose to import coal from other countries because of the shipping policy, which will take effect in May, this year.

“Some of our buyers told us they would buy coal from other countries,” Hendri said in Jakarta on Feb. 20.

Most of Indonesia’s coal exports are based on Free on Board (FoB), in which the buyers are responsible for shipping and insurance costs. According to Hendri, many importers feared the lack of Indonesian ships would hamper the transportation of coal to their countries.

In addition, Indonesia has few ships that meet international shipping standards to ship coal overseas, he said.

“If the regulation is enforced without any exceptions, then our exports could fall 99 or even 100 percent,” Hendri told The Jakarta Post.

The absence of technical instructions for the regulation and a lack of clarity about how the regulation is to implemented has created more uncertainty for both coal producers and importers, the APBI argued. 

The regulation, which requires coal exporters to transport coal using Indonesian flagged ships, was initially set to take effect in April 2018 but Energy and Mineral Resources Ministerial Regulation No.80/2018 delayed the implementation until May 2020.

According to data compiled by the APBI, the total deadweight tonnage (DWT) of all national-flagged bulk carriers is only 3.5 million metric tons. Meanwhile, Indonesia’s exports reach between 35 and 38 million tons of t coal per month.

A total of 78 out of 109 locally owned bulk carriers are also more than 15 years old, meaning they are unable to dock in countries that have strict standards on the age of vessels, the APBI’s document reads.

“Importers such as Japan will not accept our ships because they are too old and unsafe. We also usually use Panamax (mid-sized cargo ships) for long hauls, and only 18 Panamax are owned by local companies,” said APBI member Tulus Sebastian Situmeang.

The association’s secretary-general Hendra Sinadia said he hoped the government would withhold the regulation’s implementation, as stakeholders were wary of the uncertainty. (mpr)