Indonesia's Coal Export Ban & Mining Permit



President Joko Widodo (Jokowi) revoked 2,078 companies' permits for coal mining. According to him, permissions granted for years have not been implemented, putting the utilization of natural resources on hold to improve the surrounding community's welfare. "Today, as many as 2,078 mineral and coal mining firms' permits have been withdrawn due to their failure to submit a work plan," he stated during a press conference webcast on Thursday (1/6). Thus, where are the mining businesses whose distribution was revoked? According to the Ministry of Energy and Mineral Resources' Directorate General of Mineral and Coal, 1,776 of the total canceled business permits were mineral mining businesses, including metallic minerals, non-metallic minerals, and rocks. The confiscated permits cover an area of 2,236,259 hectares (ha) scattered over 18 provinces that include Bengkulu, Jambi, South Sumatra, Banten, West Java, Central Java, Yogyakarta, East Java, West Kalimantan, and Kep. Bangka Belitung, etc. Apart from mining, Jokowi withdrew 192 permits covering an area of 3,126,439 ha in the forestry sector. The reason is that the permission has expired, and no work plan has been developed, resulting in the area being neglected. Jokowi also withdrew the use rights (HGU) for 34,448 ha of abandoned plantations across the nation.


Aside from some mining permit that has been revoked, Jokowi has also released the Coal Export Ban from January 1, 2022, to January 31, 2022. The policy is stated in the circular letter of the Directorate General of Mineral and Coal of the Ministry of Energy and Mineral Resources (ESDM) Number B-605/MB.05/DJB.B/2021 issued December 31, 2021. The export ban is a step toward ensuring adequate coal supplies for power plants. These measures are implemented because if the supply of coal declines, it will impact the electricity supply of over 10 million consumers for PT PLN in and outside of Java. A statement was also made by the Minister of Finance, Sri Mulyani Indrawati, on prohibiting coal exports. She believed that this policy was necessary to ensure the long-term viability of the national electricity supply; however, every decision must come with such consequences, which shows that the government prioritize the domestic market requirement to supply coal. PT Adaro Energy (ADRO) has also responded to the ban on coal exports. Mahardika Putranto, Corporate Secretary of Adaro, stated in information disclosure on Tuesday (1/4) on the Indonesia Stock Exchange (IDX) in Jakarta that the company's subsidiaries are affected by the policy. They plan the appropriate procedures in responding to the circumstance, both in terms of government policy and pre-existing relationships with other associated parties. PT Adaro Indonesia, Balangan Coal Companies (PT Semesta Centramas, PT Laskar Semesta Alam, PT Paramitha Cipta Sarana), PT Mustika Indah Permai, and PT Maruwai Coal are among the subsidiaries within the Adaro ecosystem.


The world's biggest thermal coal exporter implemented the ban has initiated crises for its largest customers, such as China and Japan, as they walk toward the peak electricity demand in winter. The Japanese government has protested the ban on coal exports that Indonesia will implement until January 31, 2022, reflected in a letter sent by the Japan Ambassador to Indonesia, Kanasugi Kenji. The "sudden export ban has a serious impact on Japan's economic activities as well as people's daily life," he wrote in a letter Tuesday (1/7) to Indonesia's Energy and Mineral Resources Minister, Arifin Tasrif. Japan usually acquired Indonesia's coal supply of 26.9 million tons. As public known, Japan's power generator and manufacturing rely on coal supplies from Indonesia of a massive 2 million tons per month. However, Japan's representatives said they also understand the scarcity of coal for electricity in Indonesia. Therefore, Japan has offered an alternative so that the Indonesian government would continue to open exports of High Calorific Value (HCV) coal, which is not used by local generators. Meanwhile, according to Fitch Solutions analyst Sabrin Chowdhury, China will look for partners other than Indonesia to meet their energy needs, especially if the policy is extended again. Indonesia exports a vast 127.7 million tons of coal to China, equivalent to 32% of the total export volume in 2020. Rory Simington, principal analyst for Asia Pacific coal research at Wood Mackenzie, believes the current ban could have been avoided if coordination between trade countries could run well in meeting domestic interests. "We estimate a total of 40 million tons of Indonesian exports in January and total domestic demand to be in the range of 12 million tons; managing any shortfall requires only a fraction of the total capacity," he added. All in all, the mining industry's permit condition and coal export ban have been around for a while, affecting Indonesia and many other countries, as Indonesia contributed to an enormous amount of coal export globally. These circumstances brought a sentiment not only to coal trade but also to the capital market, knowing mining companies play an adequate role in the state's capital market.


Sources:

CNBC

CNN

IDX Channel

The Jakarta Post


Brought to you by BCA Finance

31 views0 comments

Recent Posts

See All