- Advertisement -
China TimesIndonesia's coal export ban may hit China's economy

Indonesia’s coal export ban may hit China’s economy

Barges carrying coal line up along the Mahakan River in Indonesia's East Kalimantan province.  (August 31, 2019)
Barges carrying coal line up along the Mahakan River in Indonesia’s East Kalimantan province. (August 31, 2019)


Indonesia, the world’s largest coal exporter, banned coal exports in January in order to ensure domestic supply, sparking concerns that global coal prices may soar, and its biggest customer China may also be hit, causing a power shortage crisis. However, observers believe that China’s coal production capacity is currently overcapacity, most factories are also entering the off-season of production, and electricity consumption has slowed down. Therefore, the amount of coal required for China’s power generation should be limited by the impact of Indonesia’s export ban. In particular, Beijing may also reduce carbon emissions. The target is to implement power rationing again, but overall, the soaring coal price is still not conducive to China’s economic recovery.

Indonesia’s coal inventory was in short supply at the end of last year. Therefore, in order to ensure the safe supply of coal to domestic power plants, the Indonesian Coal Mine Bureau has imposed an emergency ban and suspended coal exports for one month from New Year’s Day in 2022. 40 million tons of coal exports.

File photo: Indonesian President Joko Widodo
File photo: Indonesian President Joko Widodo

Indonesian President Joko Widodo said coal miners and liquefied natural gas producers must prioritize domestic demand and ensure energy security before exporting to other countries.

According to Indonesia’s “Domestic Market Obligation” (DMO) policy announced in 2018, local coal miners must supply 25% of their annual production to Perusahaan Listrik Negara, and the purchase price cannot exceed US$70 per ton, about At present, the supply of coal mining enterprises has not reached the government standard.

Although the Indonesian National Electric Power Company received an additional 7.5 million tons of coal on January 4, the ban evaluation review meeting originally scheduled for January 5 was postponed, which means that the export ban is unlikely to be eased or lifted in the short term, which makes Indonesia’s main fuel burner. Coal-importing countries are caught up in fears of tight energy supplies. The Japanese embassy in Jakarta recently urged the Indonesian Ministry of Energy to revoke the ban, because the ban will have a serious impact on the Japanese economy and people’s lives.

According to data from Kpler, an international energy research company, in 2021, China, India, Japan, and South Korea will receive a total of 73% of Indonesia’s coal exports. Indonesia is also China’s largest coal supplier. According to statistics from the General Administration of Customs of China, China imported nearly 300 million tons of coal in the first 11 months of last year, of which about 170 million tons came from Indonesia, accounting for 61%.

Due to the “power shortage” crisis in some provinces in China since the middle of last year, and after the Sino-Australian relationship has deteriorated, Beijing has suspended coal imports from Australia and turned to increase its dependence on Indonesian and Russian coal. Therefore, after Indonesia announced the coal ban, some market participants worried that China’s energy crisis may intensify.

Indonesia coal ban has limited impact on China

However, Tao Yifen, an associate professor of politics at National Taiwan University in Taipei, believes that Indonesia’s coal ban will not have much impact on China’s coal-fired power supply.

Tao Yifen told VOA: “The vast majority of China’s coal is produced by itself, and less than 10% is imported. About 6% of the coal used for power generation in China is produced in Indonesia. Now it has entered the off-season of production. Coupled with the Chinese New Year at the end of January, (factories) usually shut down, so China’s own electricity demand is decreasing, so it won’t have much impact.”

Wang Weiluo, a technology and water conservancy expert living in Germany, also said that China has asked coal companies to increase production capacity after power and production curbs last fall. Therefore, even if the amount of coal imported to Indonesia is reduced, China will not suffer from electricity shortages again.

Wang Weiluo told VOA: “China’s coal production capacity has reached a maximum of 5 billion tons. Due to the production restriction order of the National Development and Reform Commission, many coal mines (commercials) cannot exert their production capacity and are in a state of excess. As long as they can Taking advantage of the domestic coal production capacity, China’s coal output will increase very quickly. Since September this year, because the coal price has gone up and the electricity price has gone up, you have not seen the phenomenon of power shortage.”

However, Wang Weiluo said that if Indonesia prolongs the implementation of the coal ban, coal prices will remain high due to reduced supply, which will make life difficult for low-income households in remote areas of China.

Wang Weiluo said: “If Indonesia restricts its exports (for a long time), then although the coal price in China will drop, the price of coal provided to remote areas will remain high, and the impact on the livelihood of these people with relatively low incomes will be very high. It’s big.”

Using the ban to counter Beijing’s hegemony in the South China Sea? Academics: low likelihood

Jakarta’s export ban is due to concerns about the insufficient supply of coal for power generation. However, according to official statistics, Indonesia plans to produce 644 million tons of coal this year, after deducting the estimated domestic consumption of 190 million tons, There are more than 450 million tons of coal available for export, so some believe that Indonesia is not short of coal, but is using the ban to counter Beijing’s recent hegemony in the South China Sea.

Indonesia drilled for oil and gas in the Natuna Islands in its exclusive economic zone in July last year (2021), but the waters of the islands overlap with China’s “nine-dash line” in the South China Sea. Beijing Not only protested, but also sent coast guard ships to the waters, and even sent a letter asking Indonesia to stop drilling operations, which led to Indonesia’s decision to strengthen its defense security on the island.

In this regard, Tao Yifen of National Taiwan University believes that Indonesia’s coal ban is mainly due to the low purchase price, and should have nothing to do with Beijing’s territorial water disputes.

Tao Yifen said: “Indonesia (coal mining companies) supply coal for domestic power generation is purchased by the state from them, so the price is much lower than the international price. Indonesian coal mining companies would rather sell coal to the international market than to sell coal to the international market. It is used for domestic power generation, so there is a domestic shortage, and the government threatens to ban exports. So I think the main reason is the negotiation status between the Indonesian government and these coal mining companies, not because of the relationship with China.”

Chen Zhijie, an associate professor at the Institute of Political Science of Sun Yat-sen University in Kaohsiung, southern Taiwan, also said in an interview with VOA that it is unlikely that Indonesia will retaliate against Beijing through the coal export ban. After all, the ban is not only for China, but for all exports. All countries are treated equally.

Bullish coal prices could dent China’s economy

International coal prices have continued to rise long before Indonesia’s announcement of a coal export ban.

International coal prices were quoted at $159.24 a tonne in early December, up from a year earlier, according to the Newcastle port fuel coal index compiled by London-based commodity price supplier Argus. 82.6%. Historical records show that the fuel coal index had never exceeded $60 a tonne before last year.

The International Energy Agency has previously noted that post-pandemic economic growth has boosted global demand for coal, pushing coal prices to new highs in 2021 and that demand is expected to continue into this year. Investment bank Morgan Stanley also warned in a report that Indonesia’s coal export ban could send coal prices soaring again.

Tao Yifen of National Taiwan University also said that if Indonesia’s coal ban pushes up coal prices, it may affect China’s economy and product exports.

Tao Yifen said: “The price of coal rises and the price of power generation (just) rises. Who will bear the cost? If it is reflected in the price of electricity, it will have a great impact on industrial electricity consumption, which may affect exports and production. If the local government absorbs the cost of power generation, the local government’s finances are currently very poor. In some places, civil servants cannot pay salaries, and even no longer recruit new civil servants. Therefore, I think the more serious problem is that the local government’s finance and its Will economic growth be affected by rising electricity prices?”

According to Taiwan’s Central News Agency, the Chinese government announced that starting from New Year’s Day this year, electricity prices will be adjusted in major chemical provinces such as Jiangsu and Shandong, with an increase of up to 70% during peak periods of electricity consumption.

China resumes importing Australian coal? “Power outages” may make a comeback

Although there is no power supply crisis in China at present, Chinese President Xi Jinping proposed the “dual carbon” goal of “carbon peaking in 2030 and carbon neutrality in 2060” in 2020. Last year, he also strengthened the implementation of “dual control of energy consumption”. , that is, to control the “total amount” and “intensity” of energy consumption, and even take tough measures of “cutting off the power supply”, which forced many factories to shut down.

Tao Yifen of National Taiwan University said that burning coal is not only not environmentally friendly, but local coal production in China is inefficient and its quality is worse than that of Australian coal. Therefore, if the lack of media is really serious, Beijing may reconsider importing coal to Australia.

Tao Yifen said: “I think it (China) will try to improve its relationship with Australia (Australia) in the next few months, because Australia has a parliamentary election this year, and the current ruling party is the Conservative Party. It is more pro-American and anti-China. The opposition Labour Party is more friendly to China. From a diplomatic point of view, Beijing will want to show affection to Australia. So I think it may want to open up the import of Australian coal mines, which is an olive branch. Well, let the opposition parties have a tendency to adjust their policies towards China.”

Tao Yifen said that if the relationship between Australia and China improves, it can also reverse the current situation in the Indo-Pacific that is unfavorable to China, so Beijing is eager to repair its relationship with Canberra as soon as possible.

Chen Zhijie of Taiwan’s Sun Yat-Sen University also said that China may not only ease coal imports from Australia, but purchases may also rise rapidly. He said: “Indonesia does not export coal now, and China can only buy more from Australia (Australia) in the short term. In fact, China has resumed buying coal from Australia. At the end of last year, it urgently purchased coal from Australia, and now it is buying coal from Australia (Australia). Coal purchases are likely to rise sharply.”

However, Chen Zhijie said last year’s controversial “power rationing” measures could still make a comeback as China ramps up its efforts to reduce carbon emissions. He said: “I think the power curtailment will continue to be implemented, but it should not be at the beginning of the year, usually at the end of the year, it has to meet the emission reduction standards for that year as soon as possible, so it has to be at the end of the year. It’s time to cut power again.”

Also read:

Taiwan’s military conducts drills to enhance combat readiness during the Spring Festival, including simulated street fighting

Undercurrents are surging, China’s economic outlook this year is full of obstacles

Biden appeals to US and world on anniversary of Capitol attack

U.S., Japan launch new defense cooperation against hypersonic weapons and space threats


  1. […] Indonesia’s coal export ban may hit China’s economy […]

  2. […] Indonesia’s coal export ban may hit China’s economy […]

  3. […] Indonesia’s coal export ban may hit China’s economy […]


Please enter your comment!
Please enter your name here

Subscribe Today





Get unlimited access to our EXCLUSIVE Content and our archive of subscriber stories.

Exclusive content

- Advertisement -

Latest article

More article

- Advertisement -