Indonesia will consider relaxing its coal export ban, a government spokesman told Lloyd’s List. The restriction, announced on January 1 to ensure adequate coal supply to domestic power plants, has led to halt of shipment at a string of coal terminals and a drop in freight rates, according to shipping sources familiar with the matter. Agung Pribadi, a spokesman from the energy ministry, said Jakarta could ease the ban after reviewing the policy on January 5. “I believe all companies will comply with government policy. And if they obey the government, exports may resume,” he said in an interview. “This issue will be resolved tomorrow after we go through the evaluation of the domestic supply-demand situation.”

Indonesia, the world’s largest exporter of thermal coal, has a so-called Domestic Market Obligation policy, whereby miners must supply 25% of annual coal production to power facilities under the state utility company Perusahaan Listrik Negara for up to $70 per tonne, far below current market price. Energy ministry’s director-general of mineral and coal Ridwan Jamaludin said, on Sunday, that the ban was introduced to replenish the power plants’ stockpile because the supply of miners was below the mandatory level. He said the country produces an annual average of 500 MMT, of which about 115 MMT are earmarked for the domestic market with the rest for export.

Industry sources said government is mobilizing from several miners an additional supply of 5.1 MMT of coal for January, a volume equivalent to just four to five days of exports based on experience in the past years. “Policy makers are coming out with a list today of miners which have fulfilled their obligation,” said a Singapore-based ship chartering expert. “Those miners are said to be able to start exports again next week.” A list containing nine Indonesian coal ports and terminals, including Tarakan, Muara Berau and Tanjung Pemancingan, that have suspended cargo loading citing force majeure are now being circulated among ship operators and owners, the person added.

The average weighted supramax time charter on the Baltic Exchange, which indicates freight rates in the segment, has already dropped. Daily earnings released on January 3 for a South China trip via Indonesia to east coast India dropped $300 to $21,250, while for a South China trip via Indonesia back to South China dipped $125 to $21,125. Banchero Costa head of research Ralph Leszczynski said that dry bulk shipping in general may be adversely affected by Indonesia’s coal export ban. “If you consider that coal is about 30% of all dry bulk shipping volumes, then Indonesian coal is by itself about 10% of all dry bulk shipping demand.” The Southeast Asia country accounts for about 28% of global coal exports, or more than 300 MMT a year.

A silver lining, however, is that with coal prices spiking to more than $200 per tonne, shipping costs become less significant and may encourage long-haul exports from places such as Colombia and the US, where price of the black stones becomes more competitive. Mr. Leszczynski said coal prices are likely to spiral further if the Indonesian coal is in short supply overseas. Prices have already been elevated with Newcastle thermal coal at $188 per tonne by the end of December, more than double the price a year ago. “If we end up with China having to source more from places like Colombia, Ukraine or the US east coast, then the implications would be positive again.” He said a U-turn from Jakarta would not come as a surprise once the impact of the measure is realized. Previous attempts to export coal only on Indonesian-owned ships and an export prohibition on bauxite and nickel ore backfired “spectacularly”, he said.

The Indonesian Coal Mining Association has said the export ban was introduced “hastily without being discussed with business players” and may disrupt monthly coal production volumes of around 38-40 MMT. It said it was also concerned about potential disputes with coal buyers if the producers declared force majeure for not being able to deliver the shipments. “Ships sailing to Indonesian waters will also experience conditions of uncertainty and this would affect Indonesia’s reputation and reliability as world’s coal supplier,” said association chairman Pandu Sjahrir.