Indonesia may face coal crisis again as miners prefer to export International 2022-08-04 08:51:57

Indonesia's state-owned power group PLN may suffer from coal supply tightness if no measures are taken to strengthen supply from domestic miners, who preferred to sell coal aboard rather than domestically.

Coal miners whose supply contracts with PLN have expired were reluctant to renew contracts, reported CNBC Indonesia, citing PLN's Executive Vice President, Sapto Aji Nugroho, as saying. Those who hadn't contracted with PLN also refused to sign agreements.

Given a disparity between domestic prices and export prices, coal miners preferred to export rather than sell domestically.

This may trap the country's leading power producer into another power crisis after the previous one occurred at the beginning of this year, which led to the termination of coal exports for the whole month of January.

PLN now can maintain supply with the support from the Director General of Mineral and Coal through a so-called "emergency exit", but this is only a makeshift.

The PLN's official hoped the Public Service Agency (BLU) to start operation as soon as possible, to prompt coal miners to proceed with coal supply.

In this BLU scheme, PLN will still pay the price of $70/t, the price cap under the rule of Domestic Market Obligation, while the remaining difference from the market prices will be paid directly by the BLU to the miners.

Currently, PLN has stockpiled enough to cover 19 days of power generation. However, the figure is poised to decline at any time until steady supply contracts could be launched. However, some miners, according to Sapto Aji Nugroho, requested if they could sign the contracts for the fourth quarter, right after the BLU started operation.

After experiencing a coal supply shortage in January, PLN set a coal requirement of 66.4 million tonnes for 2022. However, with the economic rebound after the epidemic, the expected demand soared to 84.7 million tonnes.

Based on the current delivery rate of 90%, 69.2 million tonnes out of 76.4 million tonnes of coal contracts are expected to be supplied, which resulted in a gap of 15.5 million tonnes from the revised demand of 84.7 million tonnes.

(Writing by Alex Guo  Editing by Harry Huo)
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