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Indonesian coal ban implemented

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Indonesian coal ban implemented

On 31st December 2021, the Indonesian government announced a ban on coal exports for the month of January, to allow supplies at domestic power plants to be replenished after dropping to critically low levels.

The ban was met with significant opposition from mining groups and importers, with Japan’s embassy in Jakarta calling for a prompt resumption of exports. While Indonesian authorities were due to review the sudden operation this week, the ban on coal exports is likely to have a serious impact on both coal and freight markets if sustained for a long period of time.

As the largest exporter of thermal coal in the world, at approximately 400 million tons in 2020, the announcement has already impacted coal prices, with benchmarks prices in Australia and China jumping at the start of trading this week. Accounting for an average of 35-40mt of coal exports per month, this loss of cargo volume could have considerable implications for vessel demand in the Pacific.

Considering the data from Indonesian coal ports since the announcement of the ban, there is clear evidence of a sharp fall in laden vessels departing Indonesian ports, as illustrated in Figure 1 below.

While the proportion of coal loadings for domestic customers have shot up (see Figure 2), for now a primary impact of the coal ban is slowing down the movement of coal, rather than redirecting supplies from the export markets to the domestic market.

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