Indonesia coal miners' shares plunge after export ban

Shares of Indonesia’s top coal miners such as Adaro Energy, Bukit Asam and Bumi Resources tumbled on Monday following an unprecedented government ban on thermal coal exports to avoid widespread blackouts in the country.

The shock decision to ban exports in Indonesia, the world’s biggest thermal coal exporter, follows calls by the government in recent weeks to coal producers to meet their domestic market obligations (DMO), under which suppliers have to dispatch at least 25 percent of their output to the domestic market.

The move is likely to roil global markets since Indonesia exported around 400 million tonnes in 2020, with its biggest customers being China, India, Japan and South Korea.

The decision has fuelled uncertainty in the seaborne market as it will block shipments to key consumers such as China ahead of the peak winter demand season, even with deals already concluded to secure prompt cargoes. The export ban comes as several utilities are said to be holding barely four days of coal stocks after heavy rain in parts of Indonesia's key Kalimantan producing region also curbed output.

Shares of Indonesian miner Adaro Energy fell 3.1 percent, while Bukit Asam (PTBA.JK) lost 3.3 percent and Bumi Resources tumbled 2.9 percent in early trade.

The export ban is also likely to trigger another round of price volatility for coal – since spot prices have more than halved after hitting multi-year highs in late October 2021

Ridwan Jamaludin, director-general of minerals and coal at Indonesia’s energy ministry, told Reuters over the weekend that the ban was temporary but if not imposed almost 20 power plants with 10,850 megawatts of power would have had to shut.

The Indonesian Coal Mining Association (ICMA) called on the government to revoke the ban, saying in a statement it was "taken hastily without being discussed with business players". The chairman of ICMA, Pandu Sjahrir, told Reuters the group met trade ministry officials at the weekend to try to reach a solution.