Hot spot watch: Indonesia’s coal export ban
The Indonesian government has lifted the ban on coal exports effective February 1 as coal supplies from domestic power plants improve, according to a statement released by the Ministry of Energy and Mineral Resources on Monday.It also officially lifted a month-long ban on coal exports that had been in place since January 1.Indonesia’s coal export ban to some extent impacted the trend and market sentiment of domestic thermal coal, which is attributed to Indonesia being the most important source of China’s thermal coal imports.But on the whole, China’s thermal coal has low dependence on foreign countries and high elasticity, and strong ability to resist external impact.Compared with China’s import dependence on Indonesian coal, Indonesia’s coal export share is large, its export value is high and its dependence on China is higher.Indonesia is rich in coal resources, and the domestic industry only accounts for about 25% of the demand for coal, most of which is exported.On average, China accounted for more than 30 percent of Indonesia’s total coal exports from 2017-20.Indonesia’s recent export ban, COVID-19 and port equipment have had a certain short-term impact on coal export and shipment, but in the medium and long term, coal export is still Indonesia’s main resource utilization form, so it may have a limited long-term impact on China’s coal import.At the beginning of this year, the protagonist of the black market is not the coal and steel coke under the production limit of the Winter Olympics, nor the macro trend under the downward pressure of the economy, but the thermal coal that the market thought would “lie down” :New Year’s Day 2022 will not only ring in the New Year, but also echo Indonesia’s ban on coal exports.On 31 December 2021, Indonesia unilaterally announced a total ban on overseas sales of coal in January 2022 (1.1-1.31) to give priority to domestic power plant supplies.On January 5th what was supposed to be a reassessment of the policy was postponed until mid-January, allowing some miners who had fully met their domestic market obligations (DMOS) to be exempted from the ban and resume some exports.On February 1st, the one-month ban on coal exports was lifted, which meant the end of the ban.Indonesia’s coal export ban to some extent impacted the trend and market sentiment of domestic thermal coal, which is attributed to Indonesia being the most important source of China’s thermal coal imports.In terms of the internal and external supply structure of thermal coal in China, in the past three years, the average amount of imported raw coal accounts for 5.7% of the total amount of raw coal in China. In 2021, affected by the decline in the year-on-year growth rate of domestic output from March to August, the average amount of imported raw coal accounts for 6.1% of the total amount of raw coal in China, and the proportion of imported raw coal is slightly higher.But in general, China’s coal dependence on foreign is very low, the ability to resist external impact is strong.In China’s thermal coal imports in 2021, Indonesia is the main import source country.Before China’s Australian coal import ban, Indonesia accounted for about 63% of China’s thermal coal imports in 2020.After the Australian ban, the share of Indonesian coal increased by 12% to 75%, making The weight of Indonesian coal in China’s thermal coal import structure increasingly important.Short-term supply shocks are at the margin, especially during peak thermal coal consumption.Therefore, Indonesia’s coal export ban will not cause much disturbance to the national thermal coal supply in terms of total amount. However, as Indonesian coal accounts for a significant proportion of imported coal, it will have a certain impact on power plants in southern China and some coastal areas that use high levels of Indonesian coal.More importantly, the thermal coal market, which has few stories to hype, has become more bullish due to the “catfish effect” of the export ban.Especially after Indonesia repeatedly delayed lifting the ban, the progress of solving Indonesia’s coal export ban is far slower than the market imagined, increasing the uncertainty of the market.Downstream buyers and traders, who had been waiting for thermal coal port prices to fall to a benchmark price of rmb700 a tonne in December, rushed to buy coal in a bullish mood fuelled by Indonesia’s export ban.Not only that, due to the short pre-holiday replenishment window period this year, winter Olympics power plant replenishment and port upside down and other positive factors fermentation, Qinhuangdao PORT Q5500 thermal coal price changed the decline in December accelerated, began a strong rebound in early January, as of January 28, Qinhuangdao Port Ordos Q5500 thermal coal warehouse price 1180 yuan/ton,Compared with the end of last month, the price curve also stepped out of the deep V trend.Although the Indonesian coal export ban, which ignited the domestic thermal coal market, contributed to the domestic thermal coal price increase, Mysteel’s research on the development and utilization of Indonesian coal resources found that the ban was only a match to break the night rather than a burning fire, and it is difficult to have a profound and lasting impact on China’s thermal coal supply and demand structure.The reason behind Indonesia’s coal export ban is not that Indonesia’s coal resources are exhausted, which leads to unmet electricity demand. In fact, Indonesia, as an island country with very rich coal resources, can not only be self-sufficient, but most of its abundant coal is exported.Indonesia is rich in coal resources. According to the latest statistics from the Indonesian Coal Mining Association in 2017, the resources are 105,000 mt, more than 100 billion tons;The reserves are 21000Mt, accounting for 3.1% of the world’s coal reserves.In coal reserves, mainly lignite and low metamorphic bituminous coal, accounting for about 85%;Other bituminous coal accounts for about 15%.Because the calorific value of low metamorphic bituminous coal is about 4545 to 6459 kcal, moisture content is 15-30%, there are more medium and low kcal and no coking, Indonesian coal is mostly used as thermal coal rather than coking coal.Indonesia’s coal-bearing basins are mainly distributed in eastern and southern Kalimantan and central and southern Sumatra, with 67% of the mine distribution in Sumatra and 31% in Kalimantan.Most of Indonesia’s coal seams are from the Paleogene and Neogene systems, so they are shallower, 7 to 15 meters thick, and relatively simple, so 99% of Indonesia’s coal is produced open-pit.91% of this is from East and South Kalimantan and 9% from southern South Sumatra.Coal-rich Indonesia is also a major coal producer and exporter in the world, ranking first in total coal exports for three consecutive years from 2017 to 2019.According to statistics from the Indonesian Coal Mining Association and the Indonesian Bureau of Mines and Energy, the 2021 target is expected to produce 625 million tons of coal, and the actual production is 614 million tons, 98% of the target has been achieved, an increase of 8.9% year on year.In 2022, Indonesia’s Bureau of Mines and Energy is expected to produce 663 million tons of coal, up 8% year on year. Domestic coal supply is guaranteed to reach 165 million tons, accounting for 25% of the total coal production.From 2015 to 2021, the coal production structure of Indonesia can be seen that the amount of coal for domestic use accounts for about 25% of the total output on average, while external exports account for three-quarters of the output, which is basically consistent with the Requirement of the Indonesian DMO that coal mines should transfer 25% of coal to domestic power plants.Indonesia’s coal is mainly exported because Indonesia itself, as an emerging economy, has limited domestic economic development, and the level of coal resource development and utilization is not high, and it does not have advanced coal development and utilization technology and related industry chain.In addition, Indonesia’s own unique way of coal resource management leads to scattered and disorderly management of coal mines in various regions, which cannot achieve a good overall planning. Coal resources in various regions are mainly exported and exchanged for foreign exchange to gain benefits.Although Indonesia’s coal profits are mainly from exports, the share of coal exports has declined slightly since 2015, from 81.2 per cent to 70 per cent last year (4.6 million tonnes of production in the 2021 data were counted as inventories and excluded from export statistics), reflecting the continued increase in the overall share of coal demand in the local economy.According to the IEA, Indonesia’s coal exports will fall below 60 percent in 2040 and domestic demand will rise to 40 percent, but export-oriented coal use will remain unchanged.As can be seen from the above table, coal consumption of Domestic industries in Indonesia showed an overall growth trend from 2016 to 2021, except for the decline in coal consumption due to the epidemic in 2020.Electricity accounts for the vast majority of Indonesia’s domestic coal demand, averaging more than 80% in six years.Therefore, when Indonesian coal mines do not fulfill the corresponding domestic coal supply obligation (DMO), 25% of the domestic coal demand cannot be met, and the power industry will be the first to face the risk of coal shortage and power outage, which is one of the direct reasons for Indonesia’s sudden coal export ban.Southeast Asian countries and regions such as China, India, South Korea, Japan and the Philippines are the main destinations for Indonesia’s coal exports.Taking the data from 2017 to 2020 as an example, China, India, South Korea, Japan and the Philippines ranked among the top five countries and regions with the largest coal export volume of Indonesia, accounting for 77% of the total export volume on average.Without exception, China is Indonesia’s main coal export target, accounting for an average of about 30 percent of coal exports and 22.5 percent of total output.Officials from South Korea, Japan and the Philippines urged Indonesia to lift the export ban as soon as possible after it was imposed.However, China, which ranks first in imported coal printing, is not overly worried: 1) Indonesian coal is dominated by medium and low calorie thermal coal. At present, China has no shortage of medium and low calorie thermal coal, so its influence on the domestic coal market is limited.From the perspective of the effect and impact time of Indonesia’s ban, it is difficult to change the loose situation of China’s total thermal coal, and the coal market price will operate within a reasonable range under policy control.2) Indonesia’s coal resources are still mainly exported for exchange. Mineral resources development accounts for more than 15% of GDP. Last year, the annual export of coal was more than 400 million tons, generating up to 20 billion US dollars.If the export ban leads to a sharp fall in Indonesian coal prices and a big hit to miners’ profits, that could lead to a host of problems.Behind the ban on coal exports in Indonesia, development and utilization of coal resources distribution throughout Indonesia, ban events or Indonesia coal resources management for a long time behind a centralized eruption, or Indonesia coal export structure of current, our country have ability and confidence to do it “be yourself, look at the courthouse flowers bloom;Whether to stay or not, I hope the sky yunshuiyunshu “.Mysteel black Industry Research Service Department researcher Zhao Jingwei Disclaimer: Mysteel published by the original and reprint content, only for customer reference, not as a decision recommendations.The copyright of the original content belongs to Mysteel, and Mysteel reserves the right to pursue any infringement and quoting behavior contrary to the original content.The content reproduced is from the Internet for the purpose of passing on more information and facilitating learning and communication. 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