By Suyash Pande
January 4, 2022 - Major Indonesian mining companies are ready to commit a cumulative domestic supply of 2.9 million mt coal on hopes that it would lead to early revocation of the ban on thermal coal exports, sources part of the negotiations told S&P Global Platts Jan. 4.
Around ten biggest mining companies are ready to commit quantities ranging from 112,500 mt to 500,000 mt for January, sources said, without naming the companies.
Indonesia has banned coal exports in January amid concerns that lower supply at domestic power plants could lead to outages in the coming days, according to a letter sent to coal producers by the energy ministry Dec. 31. The ban was imposed because coal stockpiles at some of the power plants of state-owned PT Perusahaan Listrik Negara (Persero), or PLN, have dwindled to critically low levels, the ministry said.
Sources said the ministry has asked for 5.1 million mt coal in January under the Domestic Market Obligation, or DMO, and the remaining coal -- after the big mines have supplied their share -- will be provided by mid-sized and small-sized mines. As part of the DMO, coal miners must supply 25% of annual production to the domestic market, of which PLN takes the major portion.
"It is true that close to 3 million mt will be provided by big mines. Export ban is still in place, but everyone is waiting for the Jan. 5 meeting to see whether the ban will be revoked or will stay in place for longer," said an Indonesia-based miner, whose company is among the ten that has committed to supply in January.
A meeting between coal miners and the government is scheduled for Jan. 5 to reconsider aspects of the ban. Sources said that many mining companies and traders are hoping that the ban is revoked for most entities.
"Even if the ban is revoked, this is substantial supply that will be used domestically. We have to wait and see," another Indonesia-based miner said. The source expects supply to remain tight in January and February as a result of this ban.
The ban could disrupt coal production of around 38 million-40 million mt, according to the Indonesian Coal Mining Association APBI. Indonesia exported about 300 million mt coal in 2021, with China, India, Japan, and South Korea being the largest customers.
"As of today, the ban is still in place but it can change any moment now. We are losing large forex income every day. We are losing millions of dollars in income for companies and government is losing revenue every day," a third source from a mining company said.