JAKARTA (TheInsiderStories) – The heating up of the trade war between Australia and China affected global commodity prices, including coal. In addition, the commodity market had a positive impact due to the increasing demand from China.
As known, the deteriorating relationship between Australia and China was triggered when Canberra called for an international investigation into the origins of the COVID-19 virus in April 2020. While, Beijing considers this part of a provocation.
Based on the current situation, energy and mineral resources (EMR) ministry set the reference coal price in April at US$86.68 a ton or increased $2.19 per ton compared to the previous month. Other factors that contributed to April’ price were the increasing demand from Japan and the decline in supply side compared to global demand.
Last year, China announced to lift its import quota for thermal coal by 20 MT of coal until the end of the year. The world second largest economy has import 300 MT of coking and thermal coal from various countries during 2020.
The Indonesian Coal Mining Association has said China would buy thermal coal from Indonesia amounting to$1.47 billion from starting next year. The trade deal has been signed by the organization and China Coal Transportation last year.
“It is expected that there will be an increase in coal exports to China by 200 million tones in the coming year, the target amount will be reviewed annually,” wrote the association.
As the world’ largest thermal coal exporter, Indonesia has used diplomatic channels to promote coal sales throughout Southeast Asia, especially in Vietnam, as exports to China have slowed.
According to Refinitiv data, coal imports fom China, the world’ largest thermal coal consumer, to Indonesia has decreased 24.5 percent in the first 10 months of 2020 to 86.88 million tones (MT) of coal from a year ago to 115.03 MT of coal. The coordinating ministry for the economic affairs data showed, as of October, the realization of national coal exports only slightly exceeded 50 percent of this year’ targets, 395 MT of coal.
Until October, total export of thermal coal only 232.3 MT of coal or 58.88 percent of this year’ target. The sluggishness of the national coal industry also seen from the realization of investment. From the initial target of $7.7 billion, only 27.16 percent or $2.1 billion has been realized.
EMR minister, Arifin Tasrfin, said that the demand for coal in the Indonesian market fell 20 percent and South Korea dropped by 15 percent due to the policies of major coal importer countries such as India and China, which prioritize domestic coal production.
He emphasized that the COVID-19 outbreak has also resulted in a decline of coal price, global demand, limited access and mobility. as the impact, he said, the realization of national coal production also fell to 362 MT of coal from a year ago reached 409 MT of coal.
MEMR data notes that the realization of coal production in the January – August of 2020 period is equivalent to 66 percent of the national coal production target at 550 MT of coal. Even so, said Tasrifin, his office not changed the outlook for the national coal production until the end of this year.
Some analysts rated, Indonesia and Russia are likely to get benefits from the increased quota. The countries are the three biggest suppliers of seaborne thermal coal to China, while Australia and Mongolia dominate exports of coking coal, which is used in steel furnaces.
While, combined exports to Japan, South Korea, Taiwan, India and Southeast Asia fell by a total of 3.8 MT of coal on the year. 10.53 Then, total exports to India fell by around 13.29 percent in annual basis to 9.13 MT of coal in December 2020, due to increasingly competitive prices for Australian coal because of the ban in China.
Currently, both countries held a discussions on coal trade after experienced fallen export by nearly 50 percent in 2020. Sujatmiko, a director at EMR ministry office, said the amount equal to 70 percent of last year’ exports level.
Since the beginning of 2021, the coal price has been quite volatile. Opened at a level of $75.84 per ton in January, the benchmark price increased to $87.79 a ton in February, before falling in March at $84.49 per ton.
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