context: After the 2021 power crisis, largely brought on by coal shortages and market inefficiencies, Beijing is committed to ensuring smooth coal supply at all costs - it may step in to cool prices if they rise too high. With officials holding up coal as the guarantor of energy security, this instance lays bare a fundamental flaw in this logic: foreign factors can compromise energy security, which would not be the case in a renewables-dominated grid.
Indonesia banned the export of coal for the month of January 2022 due to tight domestic supply, as announced on 31 Dec 2021. Experts say that this move will have limited effects on China’s supply. Despite Indonesian coal accounting for 62 percent of China’s imports, it only accounts for 5 percent of China’s total consumption.
This will cause some disturbance in China’s coal markets, but policy adjustments should absorb fluctuations, argues Zhang Hong 张宏 China Coal Industry Association deputy secretary general.
Although the actual impact on supply will be small, the ban may affect market sentiment, argues Zuo Qianming 左前明 Cinda Securities energy sector chief analyst. Zhang Xucheng 张绪成 Kaiyuan Securities coal and building materials chief analyst agrees, arguing that domestic coal prices may rise due to the ban. However, the state is determined to prevent coal prices from rising too high, C¥1200 probably being the highest they will go, he added. International prices may see sharp increases, according to analysts.
Coal shipping from Indonesia to China takes roughly two weeks, so the export ban will affect China’s supply in late January and early February. This coincides with a low demand period as industry shuts down for the Spring Festival, reducing the risk of tight supply.
A repeat of 2021’s supply crisis is unlikely, says Yuan Jiahai 袁家海 North China Electric Power University professor. This is because since Q4 2021
- domestic coal output has been sky-high
- temperatures have been higher than expected
- coal stockpiles have increased
- downstream coal users have had production curbed by environmental restrictions
Indonesia's export ban may, however, be extended if its domestic situation does not improve. This could have major effects on China’s coal supply, warns Zuo.
China’s coal consumption will peak in the 14th 5-year plan at around 4.2-4.3 bn tonnes, says Zhang Hong. Consumption will hover around the peak level in the 15th 5-year plan (2026-2030) and begin to gradually decrease, he added. Imports will remain around 300 million tonnes per year, he forecasts.