Coal barges are pictured as they queue to be pulled along Mahakam river in Samarinda, East Kalimantan province, Indonesia, August 31, 2019. REUTERS/Willy Kurniawan

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JAKARTA, Jan 1 (Reuters) – Indonesia has banned coal exports in January due to concerns over low supplies for domestic power plants, local media reported on Saturday, citing a letter sent by the energy ministry.

The Southeast Asian country is the world’s biggest exporter of thermal coal, exporting around 400 million tonnes in 2020. Its biggest customers are China, India, Japan and South Korea.

Indonesia has a so-called Domestic Market Obligation (DMO) policy whereby coal miners must supply 25% of annual production to state utility Perusahaan Listrik Negara (PLN) at a maximum price of $70 per tonne, well below current market prices.

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In the letter cited by local media Kumparan, the ministry instructed that all coal at harbours should be stored to supply power plants and independent power producers (IPP).

“The export ban will be evaluated and reexamined based on the stock realisation of coal for PLN’s power plants and IPP,” the letter said.

Ahmad Zuhdi Dwi Kusuma, an industry analyst at Bank Mandiri, said the ban would push global coal prices higher in coming weeks as stockpiles decrease, adding Indonesia’s customers may turn to Russia, Australia, or Mongolia.

“In the midst of this global uncertainty, the market often seeks the safest partners,” he said.

Putera Satria Sambijantoro, an economist at brokerage Bahana Sekuritas, said that Indonesia’s economic growth may have resulted in a higher electricity and coal consumption forecast than earlier projections.

The ministry and PLN did not immediately respond to Reuters’ requests for comment, while the Indonesian Coal Miners Association said it would issue a statement regarding the export ban.

In August 2021, Indonesia suspended coal exports from 34 coal mining companies it said failed to meet domestic market obligations between January and July last year .

Indonesia is among the top 10 global green house gas emitters and coal makes up around 60% of its energy sources.

In recent years, Indonesia has exported about 30 million tonnes of coal in the month of January.

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Reporting by Bernadette Christina; Writing by Stanley Widianto; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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