Indonesia Postpones Move Requiring Coal Exporters to Use National Carriers

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(Image Courtesy: Youtube)

Indonesia has postponed the implementation of a regulation that would require coal exporters to use national maritime carriers and domestic insurance services, amid concerns about the impact on international trade, sources said Thursday.

According to Platts, the government has given its trade ministry up to a year to revise the policy, the sources said. “I think it is right for the government to postpone [this regulation] and try to come up with a better solution,” a major Indonesian coal miner said.

The government, coal exporters and shipping companies are to gather for more meetings to discuss the regulation, which applies to coal and crude palm oil exporters. The government was not available for comment.

“This regulation is still not ready. It is too general. There are no detailed guidelines or instructions,” a second major Indonesian coal producer said. A third miner said the proposed regulation could jeopardize Indonesia’s coal export trade if pushed through, supposedly at the end of April.

The delay has provided Indonesian thermal coal buyers and sellers with some relief as it may help avert a “big mess,” one source said. Ambiguities in the wording of the regulation, such as possible limits on exporters’ choice of shipping, have been worrying market participants.

Buyers and sellers have raised concerns that the regulation limits them to Indonesian flag-carrying vessels, as the regulation says exporters “shall use sea transport which is controlled by Indonesian sea carriage company for their transportation activities.”

Kirana Diah Sastrawijaya and Reggy Firmansyah, senior partners at UMBRA-Legal Solutions, said the definition of ‘sea transport’ in the regulation was unclear, adding that the article did not specifically mention “Indonesian-flagged vessels,” unlike in other regulations.

Market participants have also been seeking clarity on exemptions to the regulation on the grounds of limited or no availability of national shipping companies.

Limited National Vessels Available

Indonesian coal exports average 30 million-35 million mt/month, but the suitable shipping capacity of Indonesian-flagged vessels is only a little over 4 million mt, ICMA Executive Director Hendra Sinadia said at a recent coal industry gathering in Jakarta. He noted that 95% of the Indonesian coal export industry depended on foreign-owned vessels.

“We need the regulation to be defined. If companies do not have ships, we do not know what to do,” an Indonesia-based source said. An Indonesian coal supplier has to pay 10% VAT for a vessel booking and fuel costs for Indonesian ship owners are around 15%-20% higher than for others in the region, he said.

“We are already paying a 30% premium for Indonesian vessels compared to vessels from other regions. So no one uses Indonesian ships.” The source also said the excess cost will be carried over to prices, which may not be favorable for Indonesian coal.

Erwin Raza, Assistant Deputy for National Logistics Development at the Coordinating Ministry for Economic Affairs, said the regulation aimed to narrow the deficit in revenue for domestic maritime companies by increasing investment, and by opening more opportunities for national shipping companies.

(Source: Platts)

Sea News, February 26