There are exactly two things that resource investors should be watching right now in the coal space.
The first is India. And its phenomenal growth in thermal coal imports–which appear to be accelerating the last few weeks (imports in August were just announced up 12% year-on-year).
The other is Indonesia’s coal exports. With this being the only place on Earth that’s been able to expand coal supply significantly the last few years. Helping to keep a lid on prices globally.
Related: Analysts Say India's Coal Imports Are About to Explode
And last week we got one of the most important data points yet on coming changes in Indonesia’s export dynamics. With local sources suggesting that the country may finally see a significant fall in outgoing coal shipments.
Reuters reported that Indonesia’s coal producers are struggling with new export rules imposed by the government earlier this year. With the news service noting official estimates that coal exports could drop between 15 and 20% in October because of problems with the new regulatory regime.
The main reason is compliance. Under the new rules, coal exporters are required to register with the government–a process that involves proving that mining titles have been properly registered, and necessary taxes have been paid.
Related: This Brand New Coal-Producing Nation to Start 2015
But many coal miners are reportedly having problems providing such assurances. With Indonesia’s director-general of coal and minerals being quoted as saying that “hundreds of [applications] are still in my office.” The list of companies having problems includes “a couple of major firms”, according to the Indonesian Coal Mining Association.
In fact, the government has started revoking mining permits completely for many non-confirming coal mines. With officials saying that 171 permits have been annulled so far this year.
All of this suggests that things are going to be a lot different for Indonesia’s coal exports going forward. Expect both production and shipments abroad to fall–and look for numbers in October as a leading indicator.
Here’s to turning the ships around,
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Dave Forest
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