Covid-19 Lockdown in India May Disrupt Indonesia's Coal Exports

India is the second-largest market for Indonesian coal exports after China. But now, the Indian government has enforced a total lockdown over its population of 1.3 billion people for 21 days starting Tuesday, 24th March 2020, as a preventative measure aiming to control the spread of the deadly corona virus.

However, India's apparent curfew is likely to disrupt the Indonesian coal export market.

It is worthwhile noting that in 2019, Indonesia's coal exports to the Chinese market had an approximate share of 30%, while Indonesia's coal exports to the Indian market contributed 25.8% of Indonesia's total coal exports.

Based on data from Indonesian Customs, the country's coal exports to India have consistently increased over the last three years. In 2017, Indonesia's coal exports to India amounted to 99.3 million tons (MnT). A year later, the figure rose by 12% to 111.2 MnT. Eventually, Indonesia's coal exports increased by 10.3% to 122.7 MnT during 2019. Accordingly, it can be clearly seen that the Indian market plays a pivotal role in Indonesia's coal exports.

Chairman of the Indonesia Mining Institute (IMI) Irwandy Arief also stated, lockdown in India will have an impact on the performance of the coal business in Indonesia. However, it is not easy to describe the effect in a short period. The reason is that developments regarding the handling of Covid-19, the length of the lockdown period, as well as the effects on the global market, must also be considered. If after lockdown, Indonesian coal supply can still be accommodated, then the impact on the black gold business in Indonesia can be minimized.

"The length of the lockdown will certainly affect shipments to India", Hendra said.

Indonesian coal producer PT Bukit Asam Tbk admitted, this condition would have an impact on the export performance of the red plate coal company. However, the company's Corporate Secretary Hadis Surya Palapa claims that the impact has not been felt significant. Hadis revealed that the coal shipment of Bukit Asam to India carried out through the east coast or east coast area. According to him, the loading ports which were closed were the western and northern parts.

Although not mentioning the details of the volumes sent, the Hadis said that this March, Bukit Asam is still carrying out coal export activities to India. "In March we continued to export cargo to India", he said.

Hadis said, in the midst of conditions like now, it would prioritize domestic sales. Because the domestic coal market and prices are more attractive. "Every time we have an opportunity to increase the domestic portion, we will take advantage of this, including if there are disturbances in India", said Hadis.

Indeed, Bukit Asam's domestic sales portion is more dominant than exports. In 2020, the portion of company's coal exports is only in the range of 35% -40% of the total planned sales. This year Bukit Asam plans to produce 30.3 MnT of coal, up about 4% from the realization in 2019 of 29.1 MnT. The state-owned company is targeting to be able to sell 29.9 MnT of coal with details of 21.6 MnT for the domestic market and 8.3 MnT for the export market.

Meanwhile, the management of PT Bumi Resources Tbk claimed that they were still observing the development of the global and Indian market situation. Director and Corporate Secretary of Bumi Dileep Srivastava said that his company would take into account the actual situation until next month.

"It's too early to judge or speculate. Let's wait for the situation to develop until next month", he said.

This year, Bumi's production capacity is targeted to reach 90 to 95 MnT. Dileep said, in the last two months, Bumi's coal sales performance was positive. In January and February, the company was able to sell 14.3 MnT of coal. The sales volume grew 7.8% on an annual basis in the same period, from the previous 13.1 MnT. As a result, Dileep ensured that Bumi's coal export performance was still normal in the first quarter period.

"Our Q1 export is normal. We hope to maintain this level in March and hopefully in April it can also survive", Dileep said.