The European Commission on Tuesday proposed new sanctions against Russia over its invasion of Ukraine, including a ban on buying Russian coal and bringing Russian ships into EU ports, and said that it was also working to ban oil imports.
The EU depends on Russia for around 45% of its coal imports, according to the European Commission’s website.
Prior to the EU proposal, some European buyers had already started talks with Indonesian miners in March as they sought to replace Russian supplies, a senior official from the Indonesian Coal Miners Association (ICMA) said.
“The miners can’t increase production that quickly, it’s difficult and the capacity is already very tight,” ICMA chairman Pandu Sjahrir told Reuters on Wednesday.
The Indonesian government is aiming for production this year of 663 million tonnes, a target that miners have already struggled to achieve due to unexpected restrictions on exports in January and prolonged wet weather.
The country also tightened supervision of its mandatory domestic sales after stocks fell to critical levels at local power generators.
The energy ministry estimated that Indonesia’s coal exports in January-March totaled 37.64 million tonnes, compared to 53.77 million tonnes for the same period last year.
In addition, European markets mostly demand medium-high quality coal, while most Indonesian miners produce lower quality coal, said Hendra Sinadia, executive director of ICMA. The freight costs of Indonesian coal to Europe are also not competitive with other suppliers, he added.
The few miners who might have the space to increase production will need to get government approval for additional production and exports, Hendra said. These applications are generally submitted in April-June.
The benchmark monthly coal price in Indonesia has already climbed to a record high of $288.40 per ton for the month of April due to strong global demand.
AUSTRALIA
In Australia, producers have responded to calls from buyers dependent on Russian coal and have been approached by the government to help coal buyers from allied countries, such as Poland, replace Russian supplies.
Despite benefiting from soaring prices for metallurgical coal used in steel mills and thermal coal used in power generation, Australian miners are unable to rapidly increase production and most of their volumes are tied to contracts. with existing customers.
Australian production has been hit by floods in New South Wales and Queensland, COVID-19 outbreaks and labor shortages, keeping production below full capacity.
Total thermal coal exports for the year ending June 2022 are expected to increase by around 7% from the previous year, when production was hit by China’s unofficial ban on Australian coal, to reach 206 million tonnes, then slip to 204 million tonnes in 2023, the government said in a quarterly report on Monday. Miners have also been unable to increase production in the short term, as they face difficult regulatory hurdles for new mines, community and farmer opposition to the construction of new mines, and capital constraints.