Coal deal hunters descend on Indonesia as demand peaks

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For more than 1,200 people gathered at a hotel in Indonesia’s resort island of Bali this week the message was clear: coal is here to stay.

After two years of pandemic disruptions, Asia’s top coal industry event Coaltrans is back in Bali with a turnout that some participants say mirror those seen during the boom years about a decade ago.

Buyers all over Asia, and some from Europe, flew in to the conference to hunt for any coal supply they can secure ahead of winter, as global supply shortages and growing energy security concerns drive an unprecedented rebound in coal demand.

“Coal never went anywhere. We got another 20 years with coal, like it or not,” Ben Lawson, an executive with Sanaman Coal, said on the sideline of Coaltrans when asked if coal is back.

These participants gathered as benchmark Newcastle coal surged to over $440 per tonne while Indonesia’s coal benchmark price for September was set at $319.22 per tonne after hitting a record $321.59 in August.

Western countries have sought to move away from the polluting fossil fuel in recent years to slash carbon emissions but demand for coal has surged this year as governments try to wean themselves off Russian energy while keeping a lid on power prices.

Energy prices have jumped to record levels since Russia invaded the Ukraine earlier this year, as many European countries lost access to vital supplies of natural gas and coal from their top provider Russia.

While high coal prices have helped miners like BHP Group, Glencore PLC and Adaro Energy Indonesia record bumper profits, environmentalists worry that this has stalled decarbonization efforts across Europe, and risks disrupting global climate commitments.

A supply gap in sea-borne coal is expected to persist throughout the year and Europe’s 2022 imports of thermal coal could be the highest in at least four years, an analyst told the conference on Monday.

S&P Global Ratings estimated Europe’s energy bill will exceed its pre-pandemic levels by well over 1 trillion euros ($1.00 trillion) with countries such as Germany restarting some coal power plants to meet winter heating demand.

“Walking away from coal hasn’t solved the problem, arguably it has just made things more expensive, at a time when it can’t easily be replaced,” Scott Dendy, executive director of research firm McCloskey by OPIS said at the forum.

“Working with coal is the only way to truly implement a workable energy transition.”

Boom years back?

Coaltrans organizers said there was a 30% increase in participants this year from 2019, the last in-person conference before the pandemic.

Some regular participants of the conference said the crowd was reminiscent of past Coaltrans, although it lacked the bling from the years when companies competed with one another to throw the best beach parties and buyers flew in belly dancers to entertain Indonesian miners.

Since those boom years, there has been a backlash against coal, culminating in a bleak outlook for the fossil fuel at the last in-person Coaltrans event in 2019.

While the West was increasingly rejecting the dirty fuel back then, China was buying less as it sought to produce its own supply and as renewables gained market share. Miners in Indonesia, the world’s biggest exporters of thermal coal, said at the time they would have to rely on countries such as India, Vietnam and the Philippines for export demand.

In recent months, however, Indonesia has seen buyers from Germany, Italy and Poland coming to Jakarta, looking for bargains.

“For the short term, everybody seems to agree that based on recent developments, there is a lot of optimism that coal will remain a mainstay in power source. Not only in Asia, but even Europeans are buying,” said Hendra Sinadia, executive director, Indonesia Coal Miners Association on the sidelines of the conference.

($1 = 0.9972 euros)

(By Fransiska Nangoy and Praveen Menon; Editing by Ana Nicolaci da Costa)

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