Indonesia Puts New Shipping Rules on Hold as Coal Buyers Wait

Indonesia Puts New Shipping Rules on Hold as Coal Buyers Wait
Bernadette Christina Munthe and Wilda Asmarini | February 28, 2018

Jakarta. Indonesia has postponed indefinitely the application of new rules that would limit shipments of coal and palm oil exports to only national shipping companies, a Coordinating Economic Affairs Ministry official said on Tuesday (27/02).

Indonesia is the world's biggest exporter of thermal coal and top producer of palm oil, but presently most of its exports of these commodities use foreign vessels.

The rules that were due to take effect in April were intended to boost the role of the archipelago's shipping industry but had raised concerns among the coal and palm oil industries.

The new shipping rules will only be applied once vessel requirements have been calculated and satisfied by the trade ministry, shipping industry and coal and palm oil exporters, Elen Setiadi, chief of trade and industry at the ministry, told Reuters by phone.

"Only once the vessel requirements are met and the service providers are okay will it become mandatory," Elen said, refusing to provide further details.

Trade Ministry officials did not answer phone calls or repeated written queries on the matter.

Hendra Sinadia, executive director of the Indonesian Coal Mining Association, said the latest comments on the rules being postponed were not official and the industry was waiting for a clear revision.

"There are several contracts that should have been signed that are still on hold," Hendra told Reuters. "Many big buyers overseas have asked us what is happening."

According to Hendra, 97 percent of Indonesia's coal exports use foreign vessels, and the trade rules could impact coal prices as contracts would need to be renegotiated.

According to Ralph Leszczynski, head of research at Banchero Costa shipping brokerage, the rules are "completely unrealistic," and expanding the Indonesian-flagged shipping fleet significantly would be extremely difficult in the short term because of costs involved.

Of the approximately 10,000 ocean-going bulk carriers trading in global markets, only 69 are currently flying the Indonesian flag, Leszczynski said.

By applying the rules Indonesia would risk losing its geographical cost advantage over other countries shipping coal to Asian markets, he added.

"If you drive costs of importing from Indonesia higher, you just bring those long-haul exports from the US back into the picture."

Reuters