Indonesia coal export ban impact assessment
Indonesia coal export ban impact assessment: at least 60% of exports will not be affected, with an impact of 6.5 million tons, the overall impact on domestic market is small
Breaking: Indonesia announced a ban on coal export for one month, accounting for 75% of China's coal import!
Ⅰ. What is the impact of the Indonesian ban?
| Event: | On December 31, it was reported that Indonesia banned coal export from January 1 to January 31, 2022 for fear of insufficient domestic power supply. View the product information of graphite electrode for steelmaking. After the announcement, we also paid close attention to the follow-up dynamic developments: |
| Follow up 1: | Indonesia's minister of Energy and Mines personally presided over a briefing on the notice on January 1. Many mines raised a lot of doubts about this, mainly in the following aspects:
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| Follow up 2: | On the afternoon of 1st, the Indonesian Coal Mining Association sent a letter to the Indonesian Ministry of Trade protesting the sudden ban on coal exports issued by the Ministry of Energy and Mines. Main content of the letter: the Indonesian Coal Mining Association believes that the briefing held by the Ministry of Energy and Mines this morning did not solve some problems caused by the one size fits all ban. Indonesia Coal Mining Association believes that the ban does not take into account the concerns of coal industry practitioners, is very hasty, does not comply with the government's policy of creating a good investment environment, and will have adverse effects. It requests to meet with the Minister of Trade to discuss a solution as soon as possible. |
Follow up 3: | At 11:00 on January 2, Jakarta time, Indonesia's Ministry of Commerce and Trade, together with the Ministry of Energy and Mines, held a briefing on the ban: it was emphasized again that the ban was to ensure the coal supply of local power plants in Indonesia; At the same time, it also announced the implementation of DMO by Indonesian mines. In 2021, the target total amount of local DMO in Indonesia was 166 million tons. By the end of October 2021, 141 million tons of DMO had been actually executed, making a progress of 83,33%. In the follow-up, mine exports with DMO completion of more than 75% should be released. |
Ⅱ. Interpretation
1. After the relevant news fell to the ground, Indonesian miners raised many questions, including mines that have completed DMO obligations, because as early as August 2021, Indonesian Ministry of Energy and Mines imposed sanctions on 34 coal companies in the form of export ban, because these companies did not fulfill their domestic market obligations (DMO). Therefore, many subsequent "major export mines" basically completed the DMO obligations.
2. According to the latest news on January 2, Indonesia side said that if the mine had fulfilled more than 75% of the DMO by October this year, the mine could continue to export. According to statistics, 123 mines meet the requirements, and the output of these 123 mines this year is about 390 million tons, Indonesia's annual output in 2021 is 664.5 million tons, accounting for about 59%. Therefore, these 123 mines that meet the export requirements are likely to be "export-oriented medium and large mines". Therefore, it is expected that at least 60% of exports will not be affected by the ban (some importers have received feedback that mines can ship on schedule recently).
3. From the actual impact magnitude, we expect that it will have little impact on the domestic thermal coal market:
(1) The actual magnitude is not large
In 2021, due to the impact of Australian coal restrictions, the proportion of Indonesian coal increased significantly, accounting for more than 60% of China's coal imports, making the market extremely pulsating when seeing the news. However, in terms of absolute volume, the average monthly import scale from Indonesia in 2021 is about 16.2 million tons. If 60% of exports are not affected as mentioned above, the impact is expected to be about 6.5 million tons.
(2) Actual domestic imports in January were lower than expected
Since the implementation of supply guarantee in China in October 2021, the domestic price has fallen rapidly, the international market fell behind obviously, and the price advantage of imported coal has narrowed rapidly. Especially after the domestic power plant inventory reached a record high in December, the import purchase demand further declined. After mid-December, the price difference of 4500k Indonesian coal at home and abroad has inverted to more than 100 yuan/ton. In addition, according to the preliminary bidding, the actual import demand in January 2022 is far below the monthly average level of 2021.
(3) The actual impact will also be hedged by the "Spring Festival"
From the perspective of import trade mode, most of the offshore coal imported in January will form actual domestic supply at the end of January and February. Therefore, from the time window, this reduction may also be hedged by the "Spring Festival" holiday at the end of January. At present, the domestic market has enough adjustment space and time under high supply and high inventory, contacting us with the latest developments of coal ban.
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