Coal prices are expected to rise due to the suspension of coal exports from Indonesia

The world's largest coal exporter, Indonesia, has halted steam coal exports since January 1, 2022 to divert supplies to domestic utilities that are struggling with severe fuel shortages and to avoid widespread power outages that could disrupt economic activity in the country.

The unprecedented move by the world's largest thermal coal exporter has heightened uncertainty in the maritime market as the move will block supplies to key consumers like China ahead of the peak winter demand season, even with deals already in place to ensure on-time shipments.

The decision to ban exports follows a call from the authorities in recent weeks for coal producers to fulfill their obligations in the domestic market, according to which suppliers must send at least 25% of their production to the domestic market. The export ban was imposed after a number of utilities reportedly have coal reserves for just four days after heavy rain in parts of Indonesia's main mining region, Kalimantan, further restricted production.

A number of Indonesian coal suppliers have already declared force majeure citing the ban. The decision will also affect shippers, as they can incur between $ 20,000 and $ 40,000 a day in downtime costs, while the government could face foreign exchange losses of about $ 3 billion a month in addition to royalties. and other income.

The stoppage of supplies of the largest coal exporter to the world market will immediately cause an increase in the fuel shortage not only in neighboring China, but also a deepening of the energy crisis around the world.