On January 1, Indonesia’s Ministry of Energy and Mineral Resources announced a temporary ban on coal exports until the end of the month for all coal mining and trading enterprises. Indonesian coal accounts for about 20 per cent of the total supply in the region.

The Vietnam Trade Office in Indonesia said that this move is to ensure the supply of raw materials for coal power plants in the country to prevent electricity shortages. But on the other hand, it also forces coal production and trading enterprises to fulfil the obligation and supply 25 per cent of the total export amount to the domestic market.

Data from the Indonesian ministry showed that, as of December 17, the country’s total coal production amounted to 581 million tonnes, reaching almost 93 per cent of the target for 2021. The country exported around 282 million tonnes, supplying the domestic market with 188.38 million tonnes.

According to the regulations of Indonesia, their enterprises must supply 5.1 million tonnes of coal to domestic enterprises, but so far, it is estimated that only 35,000 tonnes of coal were delivered. The issue raises concerns about power shortages on a large scale, with nearly 20 power plants threatened to shut down because of a lack of fuel.

Since 2015, Vietnam has become a net importer of coal, and this trend is increasing. During this decade, fuel imports will likely increase threefold, and 2050 will see eight times as much as 2019. This shows that three-quarters of Vietnam’s energy consumption is taken care of with imports, according to the report Vietnam Energy Outlook 2019.

Vietnam’s coal imports have increased rapidly due to the high demand for power plants, while domestic mining is increasingly difficult and costly, leading to low efficiency. In 2014, Vietnam imported nearly 3.1 million tonnes of coal, and in 2019, this figure increased 13-fold.

Vietnam had to spend $3.82 billion to import more than 33 million tonnes of coal in the first 11 months of 2021, according to data from the General Department of Customs.

Dr. Nguyen Ngoc Hung from the Institute of Energy under the Ministry of Industry and Trade (MoIT) said, “The domestic primary energy supply is gradually exhausted, pushing Vietnam into an increasing dependence on imported sources of energy.”

Meanwhile, Vietnam faces power shortages in the next few years. The latest forecasts calculated by the institute for the draft Power Development Plan VIII (PDP8) showed that, in the base scenario, the commercial electricity demand will increase 8 per cent by 2030. By 2025, the demand is expected to reach about 337.5 billion kWh, and in 2030, is expected to reach about 478.1 billion kWh. The MoIT forecasts that coal output will reach about 56 million tonnes in 2025 and 60 million tonnes in 2030.

MoIT Deputy Minister Dang Hoang An said, “The coal industry’s ability to produce commercial coal by 2030 will not increase much, only reaching about 42-50 million tonnes per year.”

Meanwhile, the coal demand is increasing, far exceeding the supply capacity of the industry.

The three largest coal import markets of Vietnam are Indonesia, Russia, and China. Vietnam’s coal imports from Indonesia have increased sharply in recent years, with a lower price than Australian coal of the same calorific value, which has higher economic feasibility than coal from other markets.

However, importers are also concerned that it will be more difficult to receive coal from Indonesia. Good quality coal mines are getting deeper, while new mines are of low quality. The weather conditions are also not favourable for coal mining.

For now, the concerns of Vietnamese coal importers are focused on the time after January 31, when the Indonesian government’s temporary hopefully ceases. The Vietnam Trade Office in Indonesia also believed that it is likely that the Indonesian government will “soon have to consider and adjust its decision due to pressure from the Indonesian coal business community.”

The Indonesian Coal Mining Association said the move “was too hasty and unexpected, without any consultation with the business community,” and has thus asked the Ministry of Energy and Mineral Resources to withdraw its ban.

Likewise, the Indonesian Chamber of Commerce and Industry also commented, “The Indonesian government’s decision was too hurried and biased, and so it is required to be revised along with the business community.”

Source: VIR