China’s ban on Australian coal boosts Indonesian exports
” The increase of [China’s] demand for its power plants exceeds its national coal supply, ”said Agung Pribadi, spokesperson for the Indonesian Ministry of Energy and Mineral Resources.
The extreme rainy season in China is helping to push up global coal prices, while geopolitics are changing supply patterns in Asia.
Fitch Ratings analyst Shubha Sethi said that while more Indonesian coal goes to China, less goes to India, where Australian exports have increased.
“The total is about the same, but the mix changes due to the ban that China has placed on Australia,” she said.
“Overall, Indonesian coal has benefited from the ban. It is a more common coal, of a much lower quality than that of Australia, which is generally used for making steel, so if China replaces it then they will use it for blending purposes.
In February, the Indonesian government noted that the “dynamic” relationship between Australia and China had shifted some of the demand from China to Indonesia. This has helped push Indonesian coal prices up 45% in the first three months of this year compared to the same period in 2020.
Traditionally, coal prices have weakened in the second quarter, but so far they have held steady.
Fitch Ratings expects the recovery in operational and financial performance of Indonesian coal miners and coal contractors to slow in the coming months. However, average selling prices will still be 20% higher this year compared to 2020.
Last year, China gave some indication of its intentions when the China Coal Transportation and Distribution Association signed a non-binding pact to increase purchases of Indonesian coal over the next three years.
However, some Australian interests in Indonesia are benefiting from the industry’s recovery.
Mining services giant Thiess announced last month that it had secured contract extensions worth $ 101 million in coal mines in East and South Kalimantan from Harum Energy and Wahana Baratama Mining, as well as coal miner Arutmin Indonesia and Geopersada Mulia Abadi, operator of a gold mine in North Sulawesi.
ASX-listed CIMIC sold half of Thiess to the UK branch of US hedge fund Elliott Management for between $ 1.7 billion and $ 1.9 billion in October.