Indonesia Coal Export Ban May Have Low Impact on Top Buyer China

(Bloomberg) -- A ban on coal exports from Indonesia may have a limited impact on top buyer China after the country boosted domestic output to stave off shortages of the fuel last year.

Record production and mild weather have helped fill power plant stockpiles in China as winter heating demand peaks, giving buyers a buffer if they're cut off from their top exporter, Morgan Stanley analysts including Sara Chan said Monday in a research note. Indonesia's energy ministry announced a monthlong halt in shipments on its website Jan. 1.

A muted impact from such a move by the world's biggest coal exporter would underscore how China's massive mining boom has helped protect its economy from an energy crisis, even as Europe is only starting to recover from record fuel and power prices.

“Even if the Indonesian coal ban takes effect in January, its impact on the overall inventory of domestic power plants is still generally controllable,” Chinese think tank Fengkuang Coal Logistics said in a note on WeChat.

There is still debate within Indonesian government bureaus over the ban, as producers want to access high-priced foreign markets, according to Morgan Stanley. The energy ministry said in its statement it was trying to secure supplies for domestic power plants with dwindling stockpiles.

China is the world's biggest user and importer of coal, and Indonesia is its biggest supplier. After China halted coal imports from Australia amid a geopolitical spat, Indonesia became an even more important source, accounting for more than 60% of imports in 2021 through the end of November, according to China Customs data.

China is also the world's biggest miner of the fuel and imports account for less than 10% of consumption. Fears of a coal shortage led to widespread power curtailments and record prices in October, and the government responded by pushing domestic miners to quickly ramp up output.

“While the proposed export control would reduce China's coal import supply substantially, the impact will be limited in the near term due to excess domestic supplies,” Morgan Stanley's Chan said.

Timing may help China, as well. If the ban only affects cargoes that haven't been loaded yet, China will continue to receive imports through the first half of January. The country's coal demand tends to fall in the lead up to Lunar New Year, which this year falls on Feb. 1, as factories shut down to allow workers to visit family.