Coal Industrial Park in Shaanxi Province, China. Courtesy of Greenpeace
The price of coal used as fuel for power generation rose more than 4% in a week due to the Indonesian government’s restrictions on coal exports. Major minerals such as iron ore and nickel, as well as rare metals such as rare earths, are also on the upswing as supply cannot keep up with demand. In addition, as the Indonesian government has announced that it will ban exports of major minerals such as bauxite, the main raw material of aluminum after coal, volatility in raw material prices is expected to increase further.
According to the ‘Major Mineral Price Trend’ prepared by the Korea Mine Reclamation and Mining Corporation on the 12th, as of the first week of January, the price of fuel coal was $167 per ton, up 4.5% from the previous week. Compared to a year ago, it increased by 106.5%. Indonesia, the world’s largest exporter of fuel coal, has raised prices by banning coal exports from the 1st due to concerns about power shortages in the country, amid a sharp rise in prices due to a recovery in demand. On the 11th, the Indonesian government decided to restrict coal exports to some ships for which payment was made and to review whether to resume exports, but it seems difficult to normalize exports in the short term.
Prices of major minerals other than coal are also continuing to climb. In particular, copper, nickel, and zinc, which are key raw materials for low-carbon quaternary industries such as electric vehicles and new and renewable energy, are recording an increase of more than 30% compared to the previous year. The price of major rare metals, such as rare earths, is also on an upward trend due to insufficient supply and increased demand.
Imports are also on the rise. According to the import and export status from January 1 to 10 announced by the Korea Customs Service, coal imports amounted to US$ 643 million, a 395.2 percent increase from the previous year. Other raw material prices such as gas (392.5%) and crude oil (79.9%) also jumped sharply. During the same period, exports increased by 24.4%, but imports of these items increased even more, resulting in a trade deficit of $4.945 billion, which was larger than a year ago.
As Indonesia’s coal export restrictions, which were initially expected to be resolved early, continue, concerns are growing that fuel supply and demand will be disrupted. Some power generation companies have formed a task force (TF) to deal with the crisis in power generation fuel supply and demand. In addition, when operating coal-fired power plants, the proportion of low-calorie coal from Indonesia was reduced and the proportion of high-calorie coal from Australia was increased. Increasing the proportion of relatively expensive Australian coal will increase the burden on power generation companies. If the shipment scheduled for this month is delayed, the ‘red light’ may be turned on to secure inventory.
The day before, Indonesian President Joko Widodo announced that he would ban exports of bauxite and copper ore this year and next year, respectively. At the end of 2019, the Indonesian government completely stopped exporting nickel ore, causing quite a stir, such as a surge in nickel ore prices.
The government predicted that even if the export of these minerals was restricted immediately, the impact would not be significant. An official from the Ministry of Trade, Industry and Energy said, “Although 100% of aluminum is imported, it is mainly imported from India and Australia, so it is not expected to have a significant impact.” Another official from the Ministry of Industry said, “Since 2014, the Indonesian government has frequently imposed export restrictions to foster its own industry, so it is highly likely that this policy will continue in the future.”