Global Coal Prices Fluctuate Amid Indonesia's 'Coal Export Ban' Policy... China Up 8%

Increase of 7.8% in Coal Deliveries for Power Generation in China in May

Coal piles in China. Photo by Global Times capture

[Asia Economy Reporter Cha Min-young] Coal futures prices in China, the world's largest coal consumer, surged nearly 8% due to Indonesia's coal export ban. Indonesia, a major coal supplier to China, has restricted coal exports for power generation throughout January, citing power shortages.

According to foreign media on the 4th, the May delivery thermal coal contract, a coal price benchmark, on the Zhengzhou Commodity Exchange in China traded at 712.4 yuan (about 133,400 won) at one point on the first trading day after Indonesia's export restriction announcement, up 7.8%. This is the highest level since the 20th of last month. The forecast that global coal prices would surge due to Indonesia's domestic protection policy has materialized.

China imported 178 million tons of Indonesian coal from January to November last year, most of which was for power generation. This accounts for more than 60% of China's total coal imports. Zhaikun Guo, an analyst at Taijun An Futures, said, "Indonesian coal mainly goes to the eastern and southern coastal regions of China, accounting for about 20% of the total supply in those areas." He predicted that since China has already raised its domestic coal production to an all-time high, Indonesia's export ban will disrupt coal supply.

A coal trader in Singapore also said, "The supply reduction is certain. Many Indonesian mining companies have declared 'force majeure'." Force majeure is a legal term used when contracts cannot be fulfilled due to unavoidable events, including natural disasters. However, the trader mentioned that domestic coal supply in China is sufficient.

Earlier, Indonesia formalized the coal export ban in January this year amid concerns of large-scale blackouts due to coal shortages at domestic power plants. An Indonesian official said, "If exports are not banned immediately, power production at nearly 20 power plants will be disrupted," putting pressure on domestic producers. This order was issued as President Joko Widodo emphasized 'national interest first.'

Foreign media report that Indonesia's coal export ban could have a ripple effect on major economies such as India, Japan, and South Korea beyond China. According to energy information company Kepler, 73% of the coal Indonesia exported last year went to these four countries.

In South Korea, there are concerns that a prolonged Indonesian export restriction could trigger a 'second urea solution crisis.' When China restricted exports of urea and fertilizers last October in response to supply shortages and price surges, South Korea experienced a shortage of urea solution, essential for diesel vehicle operation.

The South Korean government is also considering countermeasures. The Ministry of Trade, Industry and Energy formed a response team and held an emergency meeting including the power industry to monitor energy and power supply trends. Although coal is usually secured in advance during winter, so the immediate impact on supply is expected to be limited, the cost burden of power production in South Korea may increase. The steel and cement industries are also concerned about price hikes.

There are also predictions that prices of Australian coal, a competitor to Indonesia as a coal exporter, will rise. Global investment bank Morgan Stanley forecast that Australian thermal coal prices could reach an average of $140 per ton in the first quarter of this year.

This content was produced with the assistance of AI translation services.