Indonesian government bans coal exports until end of January

Indonesian government bans coal exports until end of January

Sergey Savchuk

News is trickling out from Asia, heating up the world’s energy markets. The Indonesian government has banned coal exports until the end of January, with the option of extending the restrictions. According to sources in Jakarta, this happened due to a critical situation in the national energy sector, where more than 70 percent of energy is generated on the basis of black fossil fuels.
Indonesia is a distant country and rarely gets into the focus of attention of Russian news agencies, and therefore let us allow ourselves a small statistical digression.
A republic with a population of almost 300 million people annually consumes 271 terawatt-hours of electricity, of which, as it is not difficult to calculate, 190 are coal. To assess the dynamics, we add that over the past 30 years, energy consumption in Indonesia has increased by a staggering 820 percent, and the main driver of the accompanying industrial growth is coal, the reserves of which are very large. Twenty-four billion tons of proven reserves and the eleventh line in the world table of coal powers for this indicator. At the same time, Indonesia remains the fifth world exporter, annually supplying over 400 million tons abroad. For comparison: this is only a tiny fraction of what the entire Russian coal mining industry produces combined.
National legislation obliges mining companies to supply products to Indonesian power plants as a matter of priority, but the dynamics of prices on world markets broke all established schemes. In November 2021, the price of energy grades of coal in the Asian marketsreached $ 215 per ton, which is almost three times higher than the weighted average. The producers sensed the benefits and, forgetting about the domestic market, where the government obliges to sell coal at a price not exceeding $ 70 per ton, massively redirected flows abroad. On this (only according to official statistics), players earned three billion dollars a month, which led to the fact that their own generating companies entered the new year with record low coal reserves. With a total demand of 16 million tons, only 35 thousand tons of fuel were shipped to local thermal power plants. In fact, in pursuit of profits, Indonesian companies have put their own energy sector on the brink of collapse.
However, the internal problems of Jakarta are not of much interest to its main buyers. For example, Japan, which purchases two million tons of Indonesian thermal coal every month, has already sent an official request with an insistent request to lift the ban or at least allow five Japanese coal carriers to enter Indonesian ports, which go there under existing contracts.
Tokyorests on the fact that high-calorie coal is exported, while Indonesian power plants consume mainly low-calorie brands. Japan sent a separate request regarding the supply of coking coal, without which the work of Japanese metallurgical plants will stop. It is noteworthy that the main Indonesian coke exporter, Bumi Resources, in support of the Japanese side, demanded that all restrictions be lifted immediately, that is, there is a cartel conspiracy that completely ignores the interests of its own country.
The other two major export markets for Indonesian coal are China and, oddly enough, South Korea. The latter, by the way, ignoring the global trends in the decarbonization of the economy, has doubled its coal consumption over the past 20 years, bringing it to 140 million tons per year.
And here we come to the second part of the topic.
Asian markets have long been familiar to Russian specialized companies, and the growth of exports would please not only the owners of enterprises (domestic coal is 100 percent private), but also the treasury, where additional taxes would go. However, at the moment it is impossible to increase exports due to purely physical and infrastructural reasons.
For example, in September-October, another scandal occurred when Ukraine accused Russia of deliberately blocking coal supplies from Kazakhstan, allegedly with the aim of strangling the young European democracy and creating an energy crisis. This statement was absolutely unfounded, politically motivated and it was intended to support the necessary degree of Russophobia in the citizens of Ukraine. Because long before Kiev’s emergency conclusion of contracts with Kazakh coal miners, Russian Railways announced a shortage of carriages and the maximum load on the eastern highways. In the third quarter of the past year, the shortage of different types of cars (hoppers, semi- and covered cars, timber platforms) ranged from 50 to 90 percent.
The situation was so difficult that in early December the government of the Komi Republic anxiously informed the center about a possible disruption of the heating season due to insufficient energy supplies, including all the same coal.
This is due, among other things, to the fact that Russian miners, primarily Kuzbass, have sharply increased production and supplies of their own products for export. As of September 2021, the export of hard coal from Russia reached 158 million tons (plus eight percent, the total volume of contracts – $ 11 billion), metallurgical coke and semi-coke 2.5 million tons (plus 28 percent, revenue doubled to $ 670 million ). Coal is a hard and heavy resource, and therefore, to fulfill export contracts, a multiple number of wagons were required.
But this is not the root of the problem.
Modern Russia has hit the ceiling of the carrying capacity of its two key eastern railways, the Baikal-Amur and Trans-Siberian Railways. They were built at a time when no one, even in the wildest fantasies, could imagine the modern traffic volumes.
Moscow has long understood the promising nature of Asian markets and the need to open the eastern route. Suffice it to say that for the first time the country’s president spoke about the need to increase the transmission capacity of the Trans-Siberian back in 2004, but then Finance Minister Alexei Kudrin rejected the head of state’s sensible proposal, citing the futility and lack of money.
Since then, many projects have been born.
In the fall of 2021, Russian Railways proposed three options for modernizing the BAM and Transsib. The most modest project involves the modernization of the Ulak – Komsomolsk section, the construction of more powerful approaches to the ports of Vanino and Sovetskaya Gavan. It is important to note that this project has one single goal: to increase the export of coking coal from the Elga deposit by 17 million tons. As you can see, the top people sensibly assess global trends and try to integrate domestic miners into them.
The second option is more ambitious and involves the export of Elga coal not only to Vanino, but also an additional 14 million tons to the ports of Primorye. The total throughput of the track should grow to 210 million tons per year. This project is more complex, its implementation requires at least a trillion rubles, a significant part of which is proposed to be jointly financed by Russian coal miners, who are most interested in the normalization of the railway.
The third and largest project proposes, in addition to the above, to build on the Transsib section of the track bypassing Khabarovsk, the bridge over the Amur River and the second Kuznetsovsky tunnel, in total this is one and a half thousand second and eight hundred kilometers of third tracks. The implementation of such ambitious plans requires corresponding investments – according to rough estimates, about three trillion rubles.
Modernization is underway, but behind schedule. The first stage was supposed to be completed back in 2017, but later it was postponed several times, the last deadline was the past 2021, and there is no new data on implementation yet.
Against the backdrop of the two most famous railways, other extremely important projects have been forgotten.
Already this year, the construction of the Northern latitudinal railway was to be completed – a railway in the Yamalo-Nenets Autonomous District along the Obskaya – Salekhard – Nadym – Novy Urengoy – Korotchaevo route with a throughput capacity of 24 million tons. The main line could connect the coal-mining regions of the Russian North, ensure the delivery of fuel to the port of Dudinka and guaranteed coal supplies to Norilsk’s enterprises. The branch, worth 236 billion rubles, was planned to be completed in 2015, but due to a lack of finance, construction has not begun.
The Strategy for the Development of Railway Transport in Russia until 2030, as part of the development of the cargo base of the Northern Sea Route, also spelled out the construction of the Barentskomur highway. The steel route is designed to ensure uninterrupted transshipment of goods between Surgut, Sosnogorsk and further to the port of Indiga. Surgut is coal of excellent quality, which is so in demand in the Asian markets and which is still very problematic to deliver there. In turn, Indiga is a year-round ice-free port with depths of up to 14 meters, that is, it is capable of receiving cargo ships of any class, including the largest.
All of these projects have somehow stalled, including due to a lack of funding and perturbations in the domestic coal market, when companies change hands, and the owners are in no hurry to invest in infrastructure projects.
On the other hand, there is also a positive experience.
For several months now, on the 340-kilometer section of the BAM between the Ulak-Fevralsk stations, the railway troops of the Russian Armed Forces have been successfully joining the track.
Ten military brigades are building 19 facilities from scratch, including nine siding, nine double-track inserts and one main second track. It is noteworthy that the army men do this without stopping the main movement, twice ahead of the established deadline and, most importantly, for the same money as civilian contractors. Deputy Defense Minister Dmitry Bulgakov said that half of the area entrusted to the military railway workers will be put into operation this year.
A logical thought arises: perhaps, to capture the world markets against the background of the loss of other competitors, involve the Russian army? As practice shows, our military is good not only in peacekeeping missions, but also in the peaceful construction of facilities that were needed yesterday.

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