Indonesia coal export shake-up rattles miners, traders

Indonesia's plan for coal exports to be routed through a state firm has alarmed traders and miners, who are concerned about its viability at a time of?increased coal demand due to liquefied gas (LNG), supply disruptions caused by the Iran War. The President of Indonesia Prabowo Subianto announced on Wednesday that all exports, including coal, palm oil, and ferroalloys, must go through the state-owned Danantara Sumberdaya Indonesia. This move is intended to increase revenue and stabilize the rupiah, but has nonetheless caused investor anxiety. Southeast Asia accounts for half of global electricity-grade coal trade. Asia cannot afford to have this supply squeezed, as power generators from Japan and South Korea are turning to coal to fill the void left by LNG supply disruptions.

Many questions are still unanswered. We asked about the status of the contracts, traders and the?look of the system. Gita Mahyarani said, "We're still waiting as there are many details that we don't yet know."

"Our value chain is vast. First, we need to know where DSI fits in.

MINERS AND TRADERS Afraid By New Export Policy

Ramli Ahmad said that it was not clear how the price and logistical risks would be assessed.

He said that it was unclear whether the miners would be paid in U.S. dollars or rupiahs, particularly since the rupiah has been volatile recently.

Indonesia issued a separate regulation requiring that natural resource exporters store 100 percent of their foreign earnings at state banks. This rule is effective on June 1. Business will continue as normal during a three-month transition period, and all transactions will be overseen by DSI.

Piero Marzi of Coeclerici in Vietnam, a coal trader, says export controls may increase importer prices and disrupt shipments on the short-term.

Vasudev Pamanani, a director at iEnergy Natural Resources in India, said that there was 'uncertainty about existing long-term agreements with Indonesian importers. Indonesian sovereign fund that oversees DSI has stated it will honor existing export 'contracts' but could renegotiate the prices if they are below global benchmarks.

Pamnani stated that until the rules are firmly established and consistently enforced, the market would struggle to plan or price around anything. Reporting by Sudarshan Varadahan in SINGAPORE, Bernadette Christina JAKARTA and Francesco Guarascio HANOI. Editing by Hugh Lawson.

(source: Reuters)