Column: Indonesia coal ban drives prices up, other exporters fail to step up: Russell

Coal is seen as heavy machinery unloads it from barges into a truck for distribution, at the port of Karya Citra Nusantara in North Jakarta, Indonesia, January 13, 2022. REUTERS/Willy Kurniawan

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LAUNCESTON, Australia, Jan 24 (Reuters) – Indonesia’s short-lived coal export ban has caused a stir in Asia’s maritime fuel market as the fallout may last beyond the shortage initial number of cargoes available.

The short-term impact of the sudden ban announced on Jan. 1 by the world’s biggest exporter of dirty fuel has been to push prices for cargoes from other major shippers back up to last year’s record highs.

The longer-term impact is that the key elements of being cheap and reliable, promoted by the coal industry in its fight for survival against cleaner energy alternatives, are seriously compromised.

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The Indonesian government imposed a month-long ban on coal exports on Jan. 1 in a bid to ensure sufficient domestic supplies, but on Jan. 20 restrictions were eased with 139 companies allowed to ship the fuel to Indonesia. ‘foreigner.

However, the maritime market is likely to miss several million tonnes in January and February as it will take time for Indonesian shipments to return to more normal levels.

The supply crisis is exacerbated by the inability of some major exporters, such as Russia and South Africa, to increase shipments, with only Australia likely to ship more coal in January than in December. .

Indonesia is on track to export 17.7 million tonnes of coal in January, according to ship tracking and port data compiled by commodity consultants Kpler.

It will be around 43% below December’s 31.29 million tonnes and the weakest month since Kpler started compiling data in January 2017.

Australian exports of all grades of coal are expected to hit around 31.29 million tonnes in January, Kpler said, up from 29.74 million in December and the highest since September last year.

But much of Australia’s export gain in January will likely be in coking coal used to make steel, rather than thermal coal for power stations.

Australia’s thermal coal shipments are expected to be around 17.22 million tonnes in January, up just 380,000 tonnes from December’s 16.84 million, according to Kpler.

Coal exports from Russia are estimated at 9.70 million tonnes in January, up from 13.23 million in December, while South Africa is expected to export 4.5 million tonnes in January, up from 5.43 million the preceding month.

Shipping data clearly shows that coal supply problems extend beyond Indonesia and that other major exporters, except Australia, have not been able to take advantage of the shortage created by the Jakarta ban.

PRICE BLAST

With a shortage of coal, it’s no surprise prices have recovered, with Australia’s benchmark thermal coal price, the Newcastle Port Weekly Index, as assessed by the Commodities Pricing Agency raw Argus, hitting $243.97 a ton in the week to January 21.

This is an increase of 59% from the recent low of $153.10 per ton in the week to November 12, and the price is approaching the all-time high of $252.72, reached during the week before October 15.

A cargo from Newcastle was reported to be changing hands at over $300 a ton which, if confirmed, would show the desperation of some buyers to get coal.

Russian coal prices at the eastern port of Vostochny have also risen, with IHS McCloskey pricing cargoes at $233 a ton last week, up from a recent low of around $155 in mid-November.

South African thermal coal for export from Richards Bay also rose, hitting $162.58 a tonne last week, from the recent low of $125.35 at the start of 2022.

These prices are expected to moderate with the return of Indonesian cargoes to the market and with the end of the peak winter demand period in the north.

But high coal prices and the threat of resource nationalism, as shown by Indonesia’s sudden export ban, portend a more worrisome longer-term future for seaborne coal in Asia.

Price-sensitive buyers such as India and the Philippines will be forced to seek alternatives to importing coal, either producing more domestically or switching to alternatives such as renewables plus storage or natural gas.

Traditional buyers such as Japan and South Korea may be better placed to afford high prices, but they too will seek alternatives given their long-term commitments to net zero carbon emissions.

China, the world’s biggest coal importer, will also likely seek to minimize imports by keeping domestic production high and investing more in alternatives.

GRAPH: Australia and Indonesia Coal Exports vs Newcastle Weekly Price: https://tmsnrt.rs/3nObLeQ

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Editing by Stephen Coates

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