Indonesian coal miners are struggling with slow demand this year as businesses in India, one of the country’s major coal markets, hit the brakes due to a prolonged lockdown to contain the COVID-19 outbreak, a data firm has said.
The South Asian country’s coal imports, a commodity mostly used for power generation, is projected to decrease by 19.1 per cent year-on-year (yoy) to 149 million tons, according to IHS Markit.
As India’s demand slows, IHS Markit projects a 10 per cent yoy decline in Indonesian coal exports to 406 million tons this year, from last year’s figure of 451 million tons.
IHS Markit coal, metals and mining senior director James Stevenson said India’s lower import projection was a result of slumping business and industrial activity during the country’s prolonged lockdown.
“The real change came with the lockdown in India. India, of course, is a pretty big market for Indonesian coal, [and] we now expect India to reduce its imports by about 35 million tons,” James told The Jakarta Post.
The consultancy initially projected Indonesian coal exports at 419 million tons before India announced an extended lockdown and before market conditions worsened in Southeast and East Asia, which are Indonesia’s other major coal export markets.
India went into lockdown on March 24, when most businesses shut down. The country has extended the lockdown four times.
Indonesia is the world’s largest coal producer and dry fuel contributes 14 per cent of the country’s exports, Statistics Indonesia (BPS) data shows.
Indonesia’s two most profitable coal miners last year, privately owned PT Adaro Energi and state-owned PT Bukit Asam (PTBA), previously highlighted India’s lockdown as notable risks going into the second quarter, aside from declining local demand.
Adaro and Bukit Asam executives have stated that the companies would redirect exports into other Southeast and East Asian markets.
“India’s lockdown did result in lower sales to India. But Adaro’s market is widespread, so we could divert sales,” said Adaro president director Garibaldi “Boy” Thohir.
Adaro shipped 19 per cent of its first quarter production to India. The company also shipped to China, East Asia, Southeast Asia, including within Indonesia, and other markets, such as New Zealand, Pakistan and Europe.
The miner’s profit shrank 17.36 per cent yoy to $98.17 million in the first quarter amid falling coal prices and slumping demand in Asia.
“PTBA can still sell to India but only via private harbors whose numbers are not that great,” said Bukit Asam commerce director Adib Ubaidillah previously.
Adib added that PTBA was looking at other Asian markets, such as Brunei, Hong Kong, South Korea, Thailand and Vietnam, as new export destinations.