RI Closes Coal Exports, Get Ready to rising Prices!
Coal prices rose sharply throughout 2021. Can this might continue in 2022?
Last weekend, the price of coal on the ICE market in Newcastle (Australia) closed at US$ 151.75/troy ounce. Down 0.15% compared to the previous day.
Thus, the price of coal posted an increase of 85.63% throughout 2021. This is the highest annual price increase since 2016. The high world energy demand due to the economic recovery after the impact of the coronavirus pandemic (Coronavirus Disease-2019/Covid-19) became the main cause of the boost. coal price. In addition, supply is still constrained because social distancing is still in effect.
"The hallmark of 2021 is a rally in almost all commodity prices. Although I believe prices will remain high, 2021 will still be special. I don't believe the increase will be the same in the following years," said Jeffrey Halley, Senior Analyst at OANDA, as quoted by Reuters. The Indonesian government's move to close the export faucet is likely to boost coal prices. Understandably, Indonesia is the world's largest coal exporter.
Without supplies from Indonesia, the world's coal market will be badly lost. This limited supply has the potential to raise prices upward. Meanwhile, the negative sentiment that will overshadow coal is the increasing world awareness of the threat of the climate crisis. This makes dirty fossil energy sources like coal difficult to find.
Even large coal-producing, consuming, and exporting countries such as Australia will leave this energy source. The Australian Energy Market Operator (AEMO) will draw up a plan to achieve carbon neutrality by 2050.
Under the plan, Australia is expected to completely abandon coal-fired power plants by 2043. "There will be no more coal-fired power generation in 2043," said Daniel Westerman, CEO of AEMO, as quoted in a written statement.
Coal, continued Westerman, will be replaced by other energy sources such as solar, hydro, gas, and so on. It takes an investment of around AU$ 12 billion to build these various infrastructures. Indonesia banned coal exports in January in order to maintain domestic supply for power generation. However, this prohibition is considered to have the potential to cause problems in the world's coal supply, especially for power plants.
The policy is stated in letter No. B 1605/MB.05/DJB.B/2021 issued on December 31, 2021. This prohibition is to keep Indonesia away from the threat of complete darkness due to electricity shortages.
Director-General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, added that PT PLN (Persero) experienced a new coal deficit because entrepreneurs did not comply with the obligation to fulfill coal for domestic needs (Domestic Market Obligation / DMO). ) assignments from the Government, until January 1, 2022, only 35 thousand MT were fulfilled, or less than 1 percent," said Ridwan quoted from the Ministry of Energy and Mineral Resources website. Ridwan said the export ban was temporary. The ban will be lifted when the supply of coal for domestic power plants has returned to normal. Evaluation will also be carried out after January 5, 2022.
"Why are all exports banned? They are forced and this is temporary. If the export ban is not enforced, nearly 20 Steam Power Plants (PLTU) with a power of around 10,850 megawatts (MW) will be extinguished," he said.
Even though Indonesia is spared from mass blackouts, there are risks from this ban. Especially relations with Indonesian trading partners.
"Indonesia's reputation as a global coal supplier will decline. In addition, our efforts to attract investment, show ourselves as an investor-friendly country and a business climate that is certain and protected by law will reduce its reputation," said Arshad Majid, Chairman of the Indonesian Chamber of Commerce and Industry, as quoted by Antara, Sunday (2/1/2021).
Indonesia is the world's main supplier of coal. In 2020, Indonesia's coal exports will reach 400 million tons. Indonesian customers include the world's main coal consumers such as China, India, Japan, and countries in Southeast Asia. These countries use coal to generate electricity. Ridwan said the export ban was temporary. The ban will be lifted when the supply of coal for domestic power plants has returned to normal. The evaluation will also be carried out after January 5, 2022. Referring to Statista, in 2020 China's coal power plants will contribute 71% of the national demand. The number reaches 5,170 terawatt-hours (TW/h) of the total power plant of 7,263 TW/h. Meanwhile, coal power plants in India contribute 60% of the total national electricity generation.
Both are countries that operate the world's largest coal-fired power plants. Statista noted that by 2021 China had 1,082 active power plants. This amount is equivalent to more than 50% of the world's total. While India is in second place with 281 power plants.
To meet the need for coal used for power generation, China and India rely on Indonesia. Indonesia's position as a coal importer in both countries is large.
In China, coal from Indonesia contributes to 70-80% of total imports. Meanwhile in India, it is estimated that 45-50% of coal is from Indonesia.
Seeing Indonesia's role as the world's main exporter and supplier of coal to the largest consumer countries, this prohibition has the potential to disrupt world supply. This also has the potential to make coal prices strengthen.
The disruption in the supply of coal for power plants has also disrupted China, India, and other countries that rely on Indonesia as a supplier. Especially looking at the potential spike in demand due to winter.
So that the disturbance does not enlarge and create an electrical crisis, these countries must look for alternative suppliers. Ahmad Zuhdi Dwi Kusuma, an industry analyst at Bank Mandiri, said Indonesian customers might turn to Russia, Australia, or Mongolia,
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