Column: Beware Indonesia's coal export heft in 2023
LITTLETON, Colo. Jan 25 (Reuters) - The world's top thermal coal exporter shocked global markets a year ago by temporarily banning coal exports to protect domestic power producers, sending coal prices soaring and kicking off an historically volatile year for coal and other power fuels.
But since then Indonesia has made a different mark on the global coal arena by setting a new record pace for shipments that if sustained puts it on course to be the first country to surpass half a billion tonnes of coal exports in a single year.
With global power markets still disrupted by the fallout from Russia's invasion of Ukraine - which severed pipelined natural gas supplies to Europe - demand for all power generation fuels is on track to scale record heights in 2023.
That means that despite efforts to transition global energy systems away from fossil fuels, Indonesian coal sales may hit a new milestone this year, with commensurate repercussions for emissions of carbon dioxide and other gases that are already at record concentrations in the earth's atmosphere.
Jakarta's surprise coal export ban on January 1 came at the height of last winter, and forced major importers to scramble for replacement supplies from other exporters such as Columbia, South Africa and Australia.
At the time, the move had been expected to permanently dent Indonesia's export potential as key customers took steps to reduce reliance on a single supplier by diversifying their coal purchase streams.
But Russia's invasion of Ukraine changed all that.
As Europe's top natural gas supplier and the third largest global thermal coal exporter in 2021, Russia's so-called special operations in Ukraine upended power fuel markets across Europe, and ignited a fresh climb in coal prices to all-time highs by late February.
In turn, those high prices quickly lured Indonesia coal flows back onto global markets.
For 2022 as a whole, total Indonesian thermal coal exports hit 448.5 million tonnes, a record sum that was 56 million tonnes (14.4%) larger than 2021's total, ship tracking data from Kpler shows.
That haul came despite shipments dropping by nearly 60% in January from the month before, and stayed stunted in February, as the government's partial ban on shipments jammed coal flows from Indonesia and sowed widespread confusion in international coal markets.
So far in 2023, Indonesian exports have not been hindered by any unexpected government manoeuvres, and are on track to hit 37.4 million tonnes in January, compared to just under 13 million tonnes a year ago, according to Kpler.
That January 2023 estimate is below the average monthly pace of Indonesian exports for the second half of 2022, which was 41.9 million tonnes and would equate to an annual total of 503.5 million tonnes if maintained over 12 months.
However, there are several factors in play in 2023 that may lift demand for Indonesian coal over the coming months.
Of primary importance is China's economic reboot following a subdued 2022, when Beijing's strict zero-COVID measures stifled industrial activity - and coal demand - across the world's largest coal consumer.
In late 2022, China announced a slew of stimulus and easing measures designed to restore economic activity across the country, and a recent Reuters poll of economists sees China's economy growing by 4.9% in 2023.
Increased industrial activity late last year already lifted coal imports in November and December to their highest since late 2021, and further fuel purchases look likely by the top purchaser of Indonesian coal as China's economy gathers further momentum.
The planned implementation of energy product sanctions on Russia by the European Union this year is another factor likely to support global coal demand.
Europe is set to ban imports of Russian oil products from February 5 in a move designed to apply further financial pressure on Moscow in response to the Ukraine invasion. In turn, that move is expected to further tighten supplies of all industrial fuels, and spur additional import demand of alternatives such as coal.
India's tight domestic coal stockpiles are another bullish factor supporting Indonesia's coal export potential.
The world's second largest coal consumer depends on imports for nearly a quarter of its coal supplies, 65% of which came from Indonesia in 2022.
In combination, these factors have the potential to steer Indonesian coal flows to new heights in 2023, with an ominous 500 million tonne total easily achievable for the year as a whole.
The opinions expressed here are those of the author, a columnist for Reuters.
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