Indonesia’s
New Year Gift to China- All Coal Exports Suspended!
It’s a new year! 2022 has ushered in with it a
lot of hope for people around the world. For Chinese citizens, the New Year has
brought with it gloom,
uncertainty and the looming threat of major blackouts. You see, China is an
energy-starved nation. Its power plants are perpetually in a crisis mode, since
the communist nation never seems to really have sufficient supplies of coal to
fuel its power sector with. In November 2021, China’s coal imports hit their
highest level, as the onset of winter began giving people extreme chills. With
the winter season now in full force, Chinese citizens now stare at the prospect
of freezing.
Indonesia has just put a freeze on all coal exports!
The suspension of coal exports will be in force for the whole of January, and
may be extended if need be. This is nothing short of a full-blown crisis for
China. Without Indonesian coal supplies, China will once again be gripped by an
unforgiving shortage of the fossil fuel. Even if Indonesia resumes exports by February, the cascading
effect of coal shortfall for China will disrupt normal life in the communist
nation for a long time.
Indonesia’s New Year gift to China is
savage. Ridwan Djamaluddin,
Indonesia’s director general of minerals and coal said in a statement, “When
coal supply to power plants are fulfilled then all return to normal, exports
will resume. We will evaluate everything after January 5.” Indonesia is just
trying to protect its own interests and energy security. The Southeast Asian
country is itself faced by a whammy of sorts, and power plants risk running out
of coal to produce electricity with.
Djamaluddin added, “Why is everyone banned from
exporting? It’s beyond us and it’s temporary. If the ban isn’t enforced, almost
20 power plants with the power of 10,850 megawatts will be out. If strategic actions
aren’t taken, there could be a widespread blackout.”
The widespread export ban may disrupt monthly
coal production volumes of around 38-40 million tonnes.
Export trends of previous years have shown that Indonesia sends out
approximately 30 million tonnes of coal every
January, and a significant portion of the same goes China’s way. In fact, as
luck would have it, Indonesia is China’s biggest coal supplier. For it to
suspend exports of the fossil fuel has quite literally paved the way for China
to be paralysed.
Late last year, China struck a three-year deal
with Indonesian miners for $1.5 billion of the fuel, as Beijing sought
long-term options to displace Australian supplies. According to Bloomberg,
demand for Indonesian coal has been kept strong due to China’s tremendous
appetite for the fossil fuel, even as demand from India weakens. India is
growing self-sufficient in the energy sector and has enough domestic resources
to power itself.
Therefore, the suspension of exports by
Indonesia will end up hurting China much more than it affects the Southeast
Asian country’s other coal buyers. According to an industry analyst quoted by
Reuters, the ban would push global coal prices higher in coming weeks as
stockpiles decline. This, in turn, would end up being punishingly painful for
China, as it would be paying higher prices for coal imported from alternate
sources.
Late last month, Indonesia decided to make use
of the European Union’s decision to discourage the import of Chinese steel and
aluminium. Adaro Energy, a major Indonesian coal miner, announced plans to
invest $728 million in an aluminium smelter and a second endeavour
to establish a “new energy battery factory”, marking the company’s first
substantial movements away from coal.
Indonesia’s decision
to begin challenging China’s aluminium industry came in the backdrop of Chinese
aluminium and steel factories shutting down owing to power shortages throughout
2020. And guess what, Indonesia’s suspension of coal only exacerbates the
crisis in China’s aluminium and steel industries. All this, while Indonesia
makes a big-bang entry into the aluminium sector itself!
2022 has been a disaster for China so far, and
we are only two days into it. The coming 363 days, rest assured, will be
nightmare for Xi Jinping as well, considering the fact that he remains in
power, that is.