Domestic needs prioritized . . .
Indonesia has banned coal exports for January, fearing possible electricity blackouts due to dwindling domestic stockpiles. Indonesia is the world’s largest exporter of thermal coal used for power generation, exporting nearly 400 million tonnes annually. And domestically, 60 per cent of Indonesia’s energy production is fuelled by thermal coal. Through its Domestic Market Obligation (DMO) policy, local miners must supply 25 per cent of their coal production to the Indonesian state power company, Perusahaan Listrik Negara (PLN), well under global market prices. PLN projected a shortfall of 5.1 million tonnes of coal for January, prompting the drastic measures.
Coal front and centre in national agenda . . .
Power generators on the islands of Java, Bali, Borneo, and Sumatra are running critically low in their coal supplies for the next few days. Causes of the shortage vary, including pandemic aftershocks that disrupted the supply of critical mining equipment that reduced coal production in 2021. Indonesia’s dependence on coal goes beyond power generation. Trade in the commodity raked in more than C$48 billion in export revenues in 2021 alone. Further, taxation on coal miners remains a key revenue stream for the government. Jakarta’s DMO policy allows the government to maintain a steady and cheap supply of electricity for consumers, avoiding the blackouts in major urban centres like Jakarta that have plagued President Joko Widodo in the past.
Unpopular decision . . .
Indonesian coal miners have called on the government to revoke the ban, but to no avail. Meanwhile, responses from importers are mixed. China, a major importer of Indonesian thermal coal, said it can endure the ban thanks to ample stockpiles and reductions in energy use over the Lunar New Year when industrial production slows down significantly. In contrast, Japan urgently requested an end to the ban, fearing disruption to power generation over the winter when energy demand increases. Indonesia’s decision may open opportunities for Canadian coal suppliers, as Canada is the world’s seventh-largest exporter of thermal and metallurgical coal, with much of it sourced from British Columbia.