China power crisis boosts coal imports from Indonesia to record

An image of coal transporation in Indonesia

Indonesia is now overwhelmingly Chinas biggest overseas supplier ofcoal, with shipments hitting a record last month after Beijing loosened curbs on imports to tackle itspowercrisis.

Cargoes of coking, thermal and browncoalfrom the Southeast Asian nation surpassed 21 million tons in September, from just over 17-million tons in August, and now account for about two-thirds of Chinas total imports, according to customs data. Chinese buyers have been forced to tap other suppliers of the fuel to replace Australian exports banned almost a year ago after political relations with Canberra soured.

But hopes that Mongolia could supply more coal– particularly the higher quality produced by Australia and used bysteelmills — were dashed as pandemic restrictions in Chinas neighbor saw cargoes sink below one-million tons, according to the data.

Indonesias benchmarkcoalprice has hit record levels, bolstered by a surge in demand since June, when Beijing pledged to raise imports in an ultimately unsuccessful attempt to head off thepower crisis thats now gripping the country.

Late last year, China struck a three-year deal with Indonesian miners for $1.5-billion of the fuel as Beijing sought long-term options to displace Australian supplies. Indonesia provides a lot of low-grade browncoal, which has a price advantage but is both less efficient and worse for the climate.

Indonesia should continue to ship more to China as demand weakens from another key market, India, according to Bloomberg Intelligence analystMichelle Leung. However, supply could still be prone to hitches. In recent months, Indonesia has told producers to prioritize domestic supplies, whileminingactivity has been constrained by flooding and the pandemic.

The price of one Indonesian variety of the lower-quality fuel hit $160 to $170 a ton this week, according to traders. Thats well up from $110 to $120 earlier this month. Supplies from the Southeast Asian nation remain tight due to weather-related disruptions, with sellers playing catch-up to meet prior commitments to buyers, the traders said.