While Indonesia’s decision in January to restrict thermal coal exports might have a short-term impact on China’s energy supply, the Lunar New Year break is expected to mitigate any long-term effects.
Power exports have been suspended by the world’s largest coal exporter this month to avert severe power outages in the Southeast Asian nation. There has been an increase in China’s dependence on Indonesian thermal coal due to Beijing’s prolonged trade battle with Australia, and the country bought 177 million tons in the first 11 months of 2017.
According to customs figures, this represents a 54% increase over the same time in 2020 and represents 74% of China’s total imports for the period. As a result of China’s unofficial embargo, which has been in force since October 2019, the import of thermal coal from Australia decreased by 89% in the first 11 months of the year.
Chinese coal information source sxcoal.com analyst Du Rui expects energy usage to decline dramatically over the week-long Lunar New Year vacation, which begins on January 31. As a result, he believes the ban’s effect on China will be manageable. Using historical data, Du said in a report on Monday that February’s household power usage is the lowest in a year, virtually equal to half the peak month’s consumption.
Due to a severe coal shortage in China during a statewide power crisis last year, China’s limited imports of coal from Australia after the unofficial embargo was put into place mainly were from ships that had been stuck at ports for months. Chinese officials have been obliged to search for coal imports to address the situation while simultaneously urging local miners to increase output.
China’s overall supply of thermal coal is expected to be reduced by 5.3% due to the suspension of shipments from Indonesia, which Guosheng Securities said on Sunday would impact 5.3% of the country’s total supply. Thermal coal stocks at China’s power plants may plummet to the same levels recorded in early October at the height of the power crisis as a consequence of the Indonesian export restriction, according to another study from SWS Research.
According to the paper, a possible production stop in the lead-up to the Winter Olympics to reduce pollution might worsen the issue. However, economists say that in the long run, the shock will be lessened since many Indonesian coal mines are managed by tribal leaders who may act as a check on the policy impact of the central government.
Due to heavy criticism from industry organizations, the Indonesian government has decided to reevaluate the prohibition.