Coal piles up at the Port of Rizhao, East China’s Shandong Province on November 28, 2021. China has been ramping up the production and transportation of coal, along with oil and gas as well as renewables, to cope with the winter peak season for electricity. China State Railway Group Co transported 118 million tons of thermal coal from November 1 to 26, up 34.6 percent year-on-year. Photo: VCG
China’s coal supply will see a limited impact following the one-month export ban by Indonesia – China’s largest import source of thermal coal, experts said, citing the small volume of imports compared with domestic output and the country’s already expanded and stable coal production now.
The Indonesian government on Saturday banned coal exports in January, citing worries that insufficient supply at domestic power plants could result in widespread blackouts.
Indonesia has a so-called Domestic Market Obligation policy whereby coal miners must supply 25 percent of their annual production to state utility Perusahaan Listrik Negara at a maximum price of $70 per ton, well below the current global market prices, Reuters reported.
The temporary ban is likely to push up coal prices and send shockwaves through global markets in the short term since the Southeast Asian country is the world’s biggest exporter of coal used in electricity generation, said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
Its impact on China’s coal supply, which is heavily reliant on domestic output since imports only account for about 10 percent, will be limited and controllable, Lin told the Global Times.
Since the second half of 2021, the Chinese government has taken intensive measures to ramp up coal supply, with production capacity expanded and overall inventories becoming sufficient. Now, fluctuations in coal imports will not have a major impact on domestic coal supply, he added.
A source with the China Coal Transportation and Marketing Association told the Global Times on Monday that the coal supply crisis that emerged in China late last year won’t occur again because of the Indonesian decision.
“The decision came so suddenly… they did not solicit opinions in advance. It might have some impact on China’s coastal provinces where inventories are relatively not that high,” the source said.
“As far as I know, Indonesian coal companies are reaching their government on the matter of the export ban because it affects their interests,” he noted, adding that the association will hold a video conference with Indonesian companies to discuss the scope and scale of the impact.
The Indonesian Coal Mining Association called on the government to revoke the ban, saying in a statement it was “taken hastily without being discussed with business players,” according to the Reuters report.
Data from China’s General Administration of Customs showed that China imported 290 million tons of coal from January to November last year, and Indonesia supplied about 61 percent of it.
According to Zhang Jinming, a coal analyst with Guosheng Securities, the shortage created by Indonesia’s export ban will reduce China’s supply of thermal coal by 5.3 percent.
Considering that Australian coal is still restricted and imports from other countries like Russia are limited, it will be difficult for other countries to make up for the gap in the short term, said Zhang.
A senior industry insider, who asked not to be named, told the Global Times on Monday that “there is no turning point for Australian coal imports just because of the temporary Indonesian ban since our position on Australia is consistent.”
China has been ramping up coal imports from Russia in recent months, replacing Australia, once China’s largest source of imported coal.
Between 2019 and 2021, China’s coal imports from Australia fell to zero, according to a report released by the Australia-China Relations Institute of the University of Technology Sydney in December.