The Jakarta Post
Indonesian coal mining firms expect global coal demand to recover in mid-2021 as economies around the world heal from COVID-19, even though volumes will remain below pre-pandemic levels.
Exports are expected to hit 430 million tons in 2021, growing 3.6 percent from this year, but still 8.9 percent below last year’s figure, according to Indonesia Coal Mining Association (APBI) estimates.
However, most of next year’s growth is likely to come in the July-December period, as countries focus on the distribution of COVID-19 vaccines in the January-June period, said APBI deputy chairman Kurnia Ariawan on Tuesday.
“We think the first half of 2021 will still be highly impacted by the pandemic,” he said at a virtual discussion celebrating APBI’s 31st anniversary.
“The second half is when we will see real recovery,” added Kurnia, who is also president director of coal mining giant PT Kideco Jaya Agung.
The COVID-19 pandemic has destroyed global energy demand over the past year. Demand fell so much that the Indonesian benchmark coal price (HBA) dropped to a five-year low of $49.42 per ton in September. For comparison, prices averaged around $77.89 per ton last year.
Demand has recovered in the fourth quarter as some economies have reopened, which boosted the HBA to $51 per ton in October, but experts say prices are unlikely to reach 2019 levels even in 2021.
Despite the recovery, Indonesia only exported 232.3 million tons of coal as of October, around 58 percent of this year’s target, said Coordinating Economic Minister Airlangga Hartarto.
Meanwhile, domestic coal consumption was expected to reach 141 million tons, below the target of 155 million tons, due to lower electricity demand, he added.
“Indonesia has entered an economic recovery phase and is still in a pandemic. We hope the recovery momentum carries on until 2021 and even 2022,” Airlangga said.
Nevertheless, coal prices would likely continue rising until year-end as cold winters in East Asian markets raises demand for Indonesian coal, said IHS Markit senior director for coal, metals and mining James Stevenson.
“From an Indonesian perspective, the worst is probably past,” he told The Jakarta Post on Sept 9.
Experts also say that a COVID-19 vaccine is the linchpin to global economic recovery and, by extension, to a rebound in energy demand. A vaccine is the only safeguard against new COVID-19 waves.
“For 2021, it all depends on how countries deal with COVID-19,” said APBI executive director Hendra Sinadia on Tuesday.
He highlighted China, India and Southeast Asia as the markets whose health responses were pivotal for Indonesian coal exports. The three markets are Indonesia’s top three coal buyers.
“China is getting better. Our worry is India. We don’t know how India deals with COVID-19,” he said.
China Coal Solution general manager Jimmy Deng said that China, already Indonesia’s biggest coal buyer, presented a particularly lucrative export market this year, due to tightening competition.
He said that Chinese coal had become more expensive than imported coal – up to $30 pricier per ton – but, at the same time, China has blocked off Australian coal amid rising bilateral political tensions. Australia is Indonesia’s main competitor for China.
“All these factors will favor Indonesian coal,” he said.
However, the big hurdle was that many Chinese companies had exhausted their coal import quotas and were, thus, pressuring the government to ease quotas, he explained.
“As long as the Chinese buyers have enough quota, they will definitely buy as much as they can of the imported coal,” he said.