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Coal Prices Continue To Rise As Indonesia Blocks Coal Exports

Coal shipping

Coal continues to be one of the strongest stories in the commodities sector. With news emerging this week that the world’s leading producer Coal India is hunting for overseas acquisitions of coking coal mines.

And strange news from the world’s largest coal-exporting nation could add fuel to the fire. With local problems here apparently creating potential for a significant supply disruption — that could drive global prices higher.

That’s in Indonesia’s key coal-producing region of Kalimantan on the island of Borneo. Where Reuters reported yesterday that coal exports have suddenly halted.

The news service pinpointed Kalimantan’s coal export disruption by looking at shipping data. Which show a big surge in the number of coal vessels waiting to load at Borneo’s ports — with a full 136 ships now offshore, up from 108 last week.

Delving into the situation, Reuters got a simple and mysterious answer from local industry sources. With Pandu Sjahrir, Chairman of the Indonesian Coal Mining Association, telling the news service, “The issue is that coal cannot get out because local authorities are blocking it.”

The Mining Association gave no explanation as to why authorities are blocking coal exports. And Reuters inquiries with port authorities in the area were inconclusive.

Which means we have an apparent stoppage of shipments from the world’s largest coal-exporting nation. And no idea on the cause or timeline for a restart. Related: It’s Time For Big Oil To Embrace The Digital Age

This could of course be a one-off problem that gets solved quickly. But if it does turn into something bigger, the impact on the global coal industry would be significant.

Coal buyers suddenly locked out of Indonesia would likely turn to nearby Australia for supply. Meaning we could see a spike in prices here, especially if buyers have to be aggressive in securing last-minute shipments.

Such a development could also benefit exporters in South Africa and even the U.S. Watch for more news on the cause of the Kalimantan blockade, and for rising coal prices if this looks to be a protracted issue.

Here’s to waiting for a reason.

By Dave Forest

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