Change the rules of the game

Change the rules of the game

Irina Badmaeva

Another energy crisis is brewing in Asia. The largest exporter of coal, Indonesia, suspended deliveries until the end of January. If the ban is extended or severe frosts hit, global prices for solid fuels will catch up with gas prices. How dangerous this situation is, RIA Novosti understood.
From ban to price hike
In Indonesia, the rule is that coal companies send at least 25 percent of their production to the domestic market. At $70 per ton, twice the market price.
However, according to the authorities, the enterp-rises did not comply with this requirement. As a res-ult, power plants have redu-ced fuel reserves. Theref-ore, they banned exports until the end of the month.
And quotes immediately jumped: In Europe – by 15 percent, up to $ 135 per ton, in Asia – up to 197.
In 2020, Indonesia shipped about 400 million tons of thermal coal to the world market. The largest consumers are China, India, Japan and South Korea, accounting for about 70 percent of exports. For example, over the 11 months of last year, China imported about 178 million tons. Almost all power plants in the southeastern provinces of the country are coal-fired.
Indonesia even outperformed its main competitor, Australia. According to Bl-oomberg preliminary estimates, in 2021 Jakarta sold twice as much as Canberra – 480 million tons.
The Chinese helped. Beijing refused to buy coal from the Australians for political reasons. And Canberra is now unable to make up for the shortage in the market, as it has already refocused on India, Japan and South Korea.
China, in turn, compensated for the dropped supplies with raw materials from Russia and the United States. But the Americans have little free capacity. Last year, coal exports from the United States grew by 30 percent, while domestic consumption grew by 18 percent.
It’s too early to bury
Coal is considered an obsolete resource. Developed countries have embarked on decarbonisation. However, the energy crisis that erupted last year showed that it is too early to write off this type of fuel. Does not depend on the weather, unlike solar panels and windmills. Easier to transport than natural gas. No need to build pipelines, liquefaction plants.
Therefore, now the world market is frozen in anticipation – when Indon-esian supplies will resume. First of all, the countries of the Asia-Pacific region (APR), where electricity generation is mainly coal, are under attack.
The deficit threatens India and China with serious problems, as it was last fall. The fact is that it is not easy to find an alternative to solid fuel in a short time.
Coal prices are rising, this will result in an increase in the cost of other energy resources, Ivan Belkin, general director of Label Home Inc., warns.
Moreover, an increase in demand for liquefied natural gas in Asia will spur stock quotes for blue fuel in Europe. There they already update the highs daily.
“As a result, products manufactured in the Asia-Pacific countries will rise in price. And this is a gigantic part of the world commodity market,” the RIA Novosti interlocutor adds.
Change the rules of the game
The clouds are thickest over China. The country’s own reserves will be enough to make up for the missing imports, but only if the ban on exports from Indonesia is lifted at the end of January.
Japan is also concerned. The government demanded that Jakarta allow the sale of high-calorie coal, since Indonesian power plants do not consume it.
In Jakarta, it is reported that reserves at local thermal power plants have been increased. Suspension of exports prevented shortages. However, the authorities intend to change the rules of the game by increasing mandatory domestic supplies.
For Russia, as an exporter of energy resources, this situation is beneficial. According to preliminary data from the Ministry of Energy, in 2021 Moscow shipped 227 million tons of solid fuel abroad, which is seven percent more than in 2020. Moreover, 129 were sold to the Asia-Pacific countries, Europe – only 50.
However, in order to increase Asian exports, it is necessary to modernize and expand the railway infrastructure. The possibilities of BAM and Transsib are limited.
On the other hand, the hitch with Indonesian coal is a trump card in the Russian sleeve. “You can use it to your advantage – in the framework of negotiations on the construction of a new route to China through the Power of Siberia-2 gas pipeline. In this way, they will create an alternative to coal,” says Ivan Belkin.
Most likely, this time the energy crisis will be avoided. It is not in the interests of Jakarta to aggravate the situation. “Indonesia depends on exports no less than other Asian countries on its imports. And it values its position in the market,” emphasizes Mark Goykhman, chief economist at the TeleTrade information and analytical center.
There is so far unconfirmed information that the Indonesian authorities have allowed shipments to 14 ships. About 120 more are waiting for the go-ahead to leave the port.

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