Indonesia behind on 2020 coal export target

Indonesia may fall short of a government-set target to export 400mn t of coal this year, having shipped a little more than 329mn t in January-October.

Indonesia, the world's largest thermal coal exporter, shipped a seven-month high of 32.1mn t in October, although this was still down by 8.9mn t on the year, according to customs data released today.

Exports in October represented a recovery from the 43-month low 28.2mn t that was shipped in the previous month, but the rate of supply to the seaborne market would need to accelerate further to hit the government's 2020 goal.

Shipments for the first 10 months of this year declined by about 14.1pc, or 53.9mn t, on the year to 329.3mn t, leaving 70.7mn t, or 35.3mn t/month, to reach the annual target of 400mn t. Indonesian exports averaged 37.9mn t/month in November-December last year, but the rate dropped to 32.9mn t/month in January-October this year.

The potential shortfall in seaborne exports, coupled with lower domestic consumption and relatively firm production, suggests that the Indonesian market remains oversupplied heading into the new year.

Indonesia produced 46.4mn t/month in January-October, according to energy ministry data, putting the country on course to achieve the government's 550mn t 2020 output goal. Mining companies would need to produce 42.9mn t/month in November-December to meet the goal, but they look more likely to exceed that target based on the recent production rate.

Of the 500mn t production targeted, the government earmarked about 150mn t for the domestic sector and 400mn t for export. But the economic impact of the Covid-19 pandemic limited domestic consumption to only 109mn t in January-October, implying at least a 19mn t shortfall in annual domestic demand.

This, in addition to a potential shortfall in export demand and stronger-than-expected production, is likely to have supported inventories across the country this year. But the government expects domestic coal demand to rebound strongly to 172mn t next year and Chinese demand for Indonesian exports could strengthen in the new year when import quotas are refreshed, which could help to rebalance fundamentals in the coming months.

Indonesia produced a record 616.2mn t last year and domestic consumption totalled 138mn t, according to energy ministry data. Total coal exports reached 459.1mn t, according to customs data. Argus' fob Indonesia GAR 4,200 kcal/kg price assessment has recovered by 26pc since 1 October to reach $31.63/t on 27 November.

China continues to drag on Indonesian exports

Indonesian exports to India almost recovered to last year's level in September-October, but shipments to China remained sharply lower.

Tight import restrictions in China, the biggest importer of Indonesian coal, contributed towards a 30.2mn t year-on-year decline in January-October exports to 93.8mn t, customs data show. This includes a 6.9mn t drop in October to 5.7mn t, although this was up from the 3.2mn t dispatched in September.

China's thermal coal imports declined in October by 62pc on the year, to their lowest level since December 2019, as most regions ran out of import quotas.

Chinese imports in November and December are likely to rebound, as Beijing considers allocating an additional 20mn t of 2020 import quotas to cope with domestic supply tightness and strong winter demand. But an additional 20mn t of Chinese import quotas is unlikely to be enough on its own to offset weaker exports earlier this year and raise Indonesian shipments to the 400mn t level.

High inventories in India, the second-biggest importer of Indonesian coal, along with sluggish demand because of Covid-19-related lockdowns, has also weighed on import demand.

Indonesia's exports to India declined by 21mn t, or 21pc, on the year to 79.3mn t in January-October, customs data show. A combination of higher availability from state-controlled producer Coal India, high domestic inventories and Delhi's push to replace imports with domestic coal have weighed heavily on India's demand for seaborne coal so far this year.

But exports to India were only 13pc lower on the year in October and exceeded 10mn t in total for a second consecutive month, from as low as 3.5mn t in May.

Indian power-sector coal consumption rose on the year for a second consecutive month in October, but overall seaborne receipts continued to lag 2019. The sector's imports reached 4.64mn t in October, sustaining a recovery that began in July, but were still down by 1.38mn t on the year, Central Electricity Authority data show.

Exports to northeast Asia, excluding China, have also suffered this year — falling by 9.8mn t in January-October — with only Japan sustaining demand at last year's level.

Indonesian exporters have offset lower demand to some extent in their core markets with stronger sales to southeast Asia. Exports to southeast Asia grew by 6mn t on the year in January-October to 73.6mn t and were up by 900,000t in October alone. The year-to-date growth was driven by Vietnam (+3.3mn t), the Philippines (+2.2mn t) and Malaysia (+1.5mn t), in particular.

By Ajay Modi, Andrew Jones and Jake Horslen

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