China’s proposed ban on the import of low-grade coal is likely to hit small Indonesian producers hard; Indonesia is the world’s biggest exporter of coal for power stations and as much as a third of its exports to China could be blocked if the plan is implemented as currently suggested
June 14, 2013 Leave a comment
June 12, 2013 2:04 pm
Small Indonesian coal miners to be hit by China import ban
By Ben Bland in Jakarta
China’s proposed ban on the import of low-grade coal is likely to hit small Indonesian producers hard but most large miners will only suffer a minimal impact, according to analysts and industry executives.
Indonesia is the world’s biggest exporter of coal for power stations and as much as a third of its exports to China could be blocked if the plan is implemented as currently suggested.The big Indonesian producers such as Jakarta-listedBumi Resources and Adaro Energy have the ability to blend lower and higher grades of coal in order to meet the possible new Chinese requirements and have ready access to other potential markets such as India.
“It is still a plan and needs further study,” said Cameron Tough, head of investor relations at Adaro. “We have a diversified customer group, with 53 customers in 15 countries. Last year China accounted for just 6 per cent of our sales of 48.6m tonnes.”
But there are many smaller coal miners that have far less flexibility and are already under intense financial pressure because of falling prices and their relatively higher costs.
“The part of industry that will be most exposed is the hundreds of very small producers that have little capital to wash coal and improve its characteristics,” said Xavier Jean, an analyst at Standard & Poor’s, the debt rating agency, in Singapore. “If China becomes a closed market to them it is much more difficult to establish new sales channels.”
While Indonesia is fretting about a possible Chinese ban on coal imports, Beijing is worried about Indonesia’s plan to restrict the export of unprocessed natural resources from January next year.
China relies on Indonesia for much of its imported nickel ore and bauxite, which is used to make alumina and then aluminium, and Chinese companies have been searching out new sources of these minerals to protect themselves against the possible Indonesian export ban.
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