Posted on 06 Jan 2022
Chinese prices of thermal and coking coal futures surged on January 4, the first trading day of 2022, in response to Indonesia's surprise announcement on December 31 that it was temporarily banning coal exports. Though Indonesia is now China's largest foreign supplier of coal, some Chinese sources argued that domestic supply is currently sufficient, and that Indonesia's ban may not threaten China's energy security.
At 15:00 Beijing time of January 4, the most-traded May contract for thermal coal on the Zhengzhou Commodity Exchange in Central China's Henan closed at Yuan 713.8/tonne ($112.1/t), up 6.4% from the settlement price on December 31. Also on Tuesday, the closing price of the most-traded May contract for coking coal on the Dalian Commodity Exchanged in Northeast China's Liaoning had increased 5.7% from December 31 to Yuan 2,337/t.
Beginning January 1, the Indonesian government has banned coal exports to "avoid blackouts of 10 million PLN customers", according to a release from the country's Ministry of Energy and Mineral Resources. The state-owned corporation, PT Perusahaan Listrik Negara (PLN) has the monopoly to distribute power across Indonesia and generates most of the country's electricity, Mysteel Global notes. The ban will likely remain in force for all of January.
The director general of minerals and coal at the energy and mineral resources ministry, Ridwan Jamaludin, said that if the coal export ban wasn't enforced, almost 20 power plants with a power output of about 10,850 megawatts will be forced offline, disturbing the stability of the national economy. "When supplies are met, business can be back to normal, (and) everyone can export. We'll evaluate it after 5 January 2022," Ridwan is quoted as saying at event held in Jakarta on January 1.
"The ban came out all of a sudden and some Indonesian coal miners have declared 'force majeure' (on shipments)," said a source in North China. "But there is still hope that the ban will be partially lifted with the country's government re-evaluating the whole situation."
Indonesia is one of the world's largest thermal coal exporters, with China being the country's top coal buyer, Mysteel Global noted. Over January-November 2021, China imported about 178 million tonnes of Indonesian coal for all uses, accounting for 60% of the country's total coal imports, according to the Chinese Customs data.
"Indonesian coal exports to China averaged 16 million tonnes/month (last year) which is far lower than Chinese domestic supply (given the) measures to boost production," said an industry watcher in Northeast China. "So far, this winter is not as cold as expected, and thermal coal stocks at power plants across China are quite sufficient," he added.
Over January-November 2021, China's domestic raw coal production for all uses grew 4.2% on year to 3.67 billion tonnes, among which daily coal production for November averaged 12.4 million tonnes, according to data from the country's National Bureau of Statistics (NBS).
"January is not a peak month for China's seaborne thermal coal bookings as most vessels booked this month will arrive in the country in around February, when the country's coal demand may soften during the Chinese New Year break," commented a Shanghai-based futures analyst, adding that the price competitiveness of low-calorie Indonesian coal is weakening too against Chinese domestic coal.
Over December 21-31, NBS data showed that China's 5,500 kcal/kg thermal coal price was Yuan 895/t, down by Yuan 178.3/t from December 11-20.
Source:Mysteel Global
