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Indonesian coal exports may drop through December on permit rule

An industry group said that coal exports from Indonesia, the world’s largest supplier of the power-station fuel, may decline through December as companies sought to obtain a new permit.

According to Mr Ben Lawson, the vice chairman of Coal Club Indonesia in Jakarta, overseas shipments will drop 30 million metric tonne by year end as sellers and buyers have delayed cargoes to ensure they have the licenses.

Mr R Sukhyar, the director-general of coal and mineral resources at the Energy and Mineral Resources Ministry, said that those without the permit won’t be allowed to export.

Mr Lawson said that “I was seeing buyers being cautious in September due to the fact that if their vessel or shipment was delayed, they could very well be unable to lift.”

Data from the Indonesia Coal Mining Association show, Indonesia issued a new regulation in July requiring companies to apply for licenses as registered exporters, with a deadline extended to October 1st. It’s seeking to prevent excessive exploitation of coal, meet domestic demand and secure royalty payments. About 71 million tonne of the country’s production last year couldn’t be tracked, up from 56 million in 2012.

As much as 5% of annual exports of 420 million may be affected, Mr Pandu Sjahrir, the head of the Jakarta-based association’s commercial committee, said on October 1st. Sellers who delay shipments because they don’t have a permit can’t declare force majeure to buyers and will have to pay demurrage. Force majeure is a legal clause that allows them to miss deliveries because of events outside their control.

Source – Bloomberg