AFTER lacklustre growth during the years 2014-2016, Indonesia coal exports (including lignite) picked up by 5.5% year‐on‐year in the period January to November 2017.
That was the verdict of analysts Banchero Costa who keep an eagle eye on developments affecting dry bulk shipping trends.
According to BC, demand was driven by importing countries such as China and South Korea.
“According to Statistics Indonesia, China maintained their market share of Indonesian exports at 29% over Jan‐Nov 2017, as shipments to China increased 6.5% year‐on-year to 103.4m tonnes,” BC reported.
“The increase in Chinese import demand came from a combination of factors including strengthening thermal electricity output, strong demand from domestic steel mills, and improvements in the construction and industrial sectors.”
BC noted that even as China embarked upon a campaign to switch residential and industrial coal users to natural gas, Chinese coal imports remained bullish in the near term as gas supply infrastructure took time to build up.
Nuclear reactor issues in Korea also played a part.
“South Korea’s coal imports also increased by a strong 10.2% in 2017, as nuclear reactor outages impacted energy supply, and new coal fired power stations came online,” BC reported.
“South Korea’s market share of Indonesian coal exports thus increased from 10% in 2016 to 11% in 2017, with shipments on this route increasing 15.9% year‐on‐year to 37.6m tonnes in Jan-Nov 2017.
“However, with South Korea’s ministry exploring ways to cap coal power generation, such as by raising consumption taxes on thermal coal from April 2018, their imports from Indonesia could be impacted.”
BC noted the Indonesia to India coal trade generally had been suffering, growing a minimal 2.2% to 90.5m tonnes the January-November period.
“India was previously the largest export destination for Indonesian coal exports in 2014 and 2015,” BC noted.
“However, strong domestic coal production as well as weaker coal demand from power plants has been reducing India’s demand for coal imports.”
The International Energy Agency expects India’s thermal coal import demand to fall as the government reduces import dependency, although the country’s coking coal imports are said to be likely to rise due to quality issues of their domestic coal.
“With Indonesia being the main source of lower quality thermal coal and lignite, the country’s exports to India are likely to be negatively impacted,” BC noted.
While Indonesia’s coal exports are tipped to increase this year, with its Energy and Mines Ministry forecasting a 7% increase to reach 371m tonnes this year, Banchero Costa said there had been rumours in the market of new rules that could restrict Indonesia’s coal exports to Indonesian ship operators and flagged ships.
“However, few details have been made public, and only time will tell if the market noises are true or merely speculation,” BC stated.