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Indonesia can mend its standing as an uncertain coal supplier

A look at how the republic can mitigate its geopolitical risks moving forward

Indonesia’s coal exports freeze last month effectively jammed charters and enhanced port congestions. Its position as the world’s biggest coal exporter may be jeopardised due to prior volatile policies affecting several countries.

Regaining confidence is crucial
Indonesia’s stance on domestic coal inventory impacted trade relations ever since its infamous export ban in January. The republic went as far as to revoke permits for miners and exporters for their non-compliance to domestic market obligation (DMO). It was not the least bit surprising when alarm bells rattled due to paused shipments, while Indonesia put its domestic supply above everything.

Though trade tensions were created, (in Indonesia’s defence) it is a natural thing to do ensuring they have sufficient domestic supply before fulfilling commercial agreements. However some industry observers felt it was a subtle warning to local players that compliance to regulations precedes commercial interests. Moreover, the sudden ban suggested a lapse in monitoring the balance between local supply and export movements.

Irwandy Arif, Advisor to the Energy Minister reportedly disclosed at least 8 countries reached out to Indonesia to lift the ban, highlighting the policy’s impact. Arif explained, “We do not want them feel that doing business with Indonesia is uncertain, so when the ships were ready to leave and they have been paid for, they were prioritised. We try to maintain balance.” The Chief of State utility Perusahaan Listrik Negara (PLN) also assured February’s coal supply had been secured and there would be no repeat of the crisis that came close to causing major power outages.

From the position of importers, a sudden shortage of goods can be devastating. On a national level, they have more reasons to find alternative sources to fill the shortfall to protect its domestic interests. These importers may also possibly impose a pilot phase of consolidating incoming inventory and weaning themselves off a big supplier.

How can a mega exporter regain its trust with major clients? It can start with some forecasting. When there is a surge in exports, more questions need to be asked – especially if it concerns a key commodity. Transparency is also a rule of thumb. On hindsight, if Indonesia managed to uncover the supply imbalance in time and notify its major clientele, the fiasco could have been avoided.

Marine Online News Team
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