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Spirit is willing, but capacity?

If Indonesia wishes to fill the coal gap on Russia’s behalf, it has to have the means to make it happen

The Russian-Ukraine conflict though brought substantial damages to global trade, it also provided business opportunities within the maritime industry. With a mixed bag of good and bad, the European Union (EU) not being able to be on the same page is just part of the chapter.

Limited production capacity
Indonesian Coal Mining Association Director Pandu Sjahrir told S&P Global Commodity Insights the industry should anticipate an uncertain 6-7 months for prices, attributing to the current conflict. “With respect to the prices, there is going to be increased volatility,” he highlighted. Sjahir added sanctions on Russian coal are impacting supply to Europe. Some Indonesian miners however are exploring the potential markets such as Spain, Poland and Italy. Yet, the global surge in thermal coal prices made production tricky given the already limited supply market.

The main reason for the inability to keep up is equipment shortage. Sjahir explained that contractors would take some 18 months to acquire new machinery, and also be hesitant on its prices given the current trade conditions. As much of the equipment are sourced from China, Japan, and United States, financing would be a challenge taking into consideration the prevailing net zero goals.

Indonesia’s exploring the potential of the 3 EU member states may also be a tall order. While it tries to balance acquiring equipment and timelines, the 3 prospects have their own issues. Italy and Spain preferred to wait and see, or negotiate. Spain on the other hand resisted EU’s sanctions on the pretext of not aligning with its own constitution. It remains to be seen if Indonesia’s coal can find its way to EU as it is clear risk thresholds are diminishing.

Marine Online News Team
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