On December 31, the Ministry of energy and mineral resources of Indonesia issued a notice. Due to the shortage of coal supply for Chinese power plants from January to February, the Indonesian government decided to ban coal export in January to ease the power crisis caused by China's coal supply shortage.
Indonesia is the world's largest exporter of coal / thermal coal, with an average monthly export volume of about 33 ~ 38 million tons. According to the data of the Ministry of energy and resources of Indonesia, from January to October 2021, Indonesia exported 360 million tons of coal, an increase of 9.4% year-on-year. In addition, according to India's coalmint shipping data, Indonesia's coal export was 27.2 million tons in November, down 15% from October. In 2020, Indonesia exported a total of 407 million tons, a year-on-year decrease of 11.4%. Its largest coal export destinations are China, India, Japan and South Korea. Generally speaking, Indonesia's coal export volume in January was about 38-40 million tons, of which in January 2021, Indonesia's coal export volume was 38.2 million tons, basically the same as that in the same period of last year.
In 2021, Indonesia's coal production is lower than expected. At a news conference held recently, the Ministry of energy and mineral resources (esdm) of Indonesia said that due to the influence of weather factors, especially the heavy rainfall weather caused by La Nina phenomenon, it has a great impact on the production in Kalimantan, the main production area, and the performance of Indonesia's coal industry in 2021 is not good. As of December 10, China's coal output in Indonesia was 560 million tons (563 million tons in 2020), only 89.6% of the annual output target of 625 million tons. In 2022, China's coal production in Indonesia is expected to increase to 637 ~ 664 million tons, an increase of 6.24% over the target of 2021.
What is DMO and why is export prohibited? DMO (domestic marketing bligation) is also known as "China market obligation". Previously, the Indonesian government has repeatedly urged Chinese manufacturers to fulfill Indonesia China market obligation (DMO), that is, Indonesian coal enterprises are required to supply 25% of their annual output to Chinese end users, and the price limit of 6322 kcal thermal coal supplied by coal enterprises to power plants is US $70 / ton. As early as August 2021, 34 coal producers were banned from coal export and fined, mainly because they failed to fulfill their obligations to the Chinese market from January to July 2021. At present, the coal inventory of PLN and independent power enterprises is at a very low level, which poses a threat to the power supply of the country. Therefore, the Ministry of energy and mineral resources of Indonesia decided to prohibit the sale and export of coal abroad from January 1 to 31, so as to alleviate the power crisis caused by the shortage of coal supply in China.
Indonesia is China's largest source of coal / thermal coal imports. In 2020, China Imported 300 million tons of coal, including 140.99 million tons from Indonesia, accounting for 46.4%, making it the largest coal importer. The second is Australia, which imported 78.09 million tons in 2020, accounting for 25.7%. In terms of varieties:
Thermal coal: in 2020, China imported 224 million tons of thermal coal, of which 140.24 million tons were imported from Indonesia, accounting for 62.7%, making it the largest importer of thermal coal. The second is Australia, which imports 42.54 million tons, accounting for 19%;
Coking coal: in 2020, the country imported 72.56 million tons of coking coal, of which 35.36 million tons were imported from Australia, accounting for 48.7%, making it the largest importer of coking coal. The second is Outer Mongolia, with an import of 2.37 million tons, accounting for 32.8%.
From January to November 2021, 177 million tons of Indonesian thermal coal were imported, with a year-on-year increase of 54.4%, accounting for 74.4% of the total imported thermal coal. From January to November 2021, China imported 293 million tons of coal, a year-on-year increase of 10.4%. Due to the strict restrictions on Australian coal import since 2021, under the background of the overall tight supply and demand in China's coal market, we have increased the import of Indonesian coal. From January to November, we imported 178 million tons of Indonesian coal, an increase of 63.61 million tons over the same period last year.
Thermal coal: from January to November, China imported 237 million tons of thermal coal, a year-on-year increase of 24.7%. Among them, 176 million tons were imported from Indonesia, with a year-on-year increase of 54.4%, accounting for 74.4%, making it the largest importer of thermal coal. The second is Russia, with an import of 34.83 million tons, a year-on-year increase of 65%, accounting for 14.7%. Australia imported 4.59 million tons (42.54 million tons in the same period last year), mainly due to the delay in customs clearance of coal from Hong Kong and Macao in the early stage to ensure the supply of China's coal market from October to November;
Coking coal: from January to November, China imported 47.21 million tons of coking coal, a year-on-year decrease of 31.6%. Among them, 13.18 million tons were imported from Outer Mongolia, a year-on-year decrease of 40.7%, accounting for 27.9%, making it the largest importer of coking coal. The second is Russia, with an import of 9.6 million tons, a year-on-year increase of 73%, accounting for 20.3%. Australia imported 3.45 million tons, 35.36 million tons in the same period last year;
If the export of Indonesian coal is prohibited, it will affect China's import of about 16 million tons per month, accounting for 5.3% of China's effective supply, and it is difficult to make up for it through other countries. From January to November 2021, China Shipbuilding Industry Group Power Co.Ltd(600482) effective coal supply was 3.3 billion tons (China's output was 3.06 billion tons + net import was 240 million tons), an increase of 6.1% year-on-year. In 2021, China will import about 16 million tons of thermal coal from Indonesia every month. If Indonesia prohibits coal export, it will affect 5.3% of the effective supply of China Shipbuilding Industry Group Power Co.Ltd(600482) coal. Considering that Australian coal is still limited and the import volume of other countries is limited, it is difficult to make up the gap through other countries in the short term, If Indonesia's export ban continues for a long time, it may cause the China Shipbuilding Industry Group Power Co.Ltd(600482) coal market to return to the balance of supply and demand, or even slightly tight.
The upside down of coal outside China has formed a strong support for the Chinese market. Due to the recent large decline in China's coal price, the price of imported coal began to hang upside down slightly, which will greatly limit the enthusiasm of Chinese end users and traders to purchase imported coal. According to Reuters shipping schedule, the amount of imported coal sent to China every week since late October has decreased by about 1 million tons compared with the previous week. Since mid November, the amount of imported coal by sea has decreased by about 1 million tons compared with the previous week. The reduction of the amount of imported coal will form a strong support for China's coal market.
Investment suggestion: it is particularly favorable for Yankuang energy, which has overseas coal resources and is sold to Japan and South Korea. Stick to the core assets, be optimistic about the valuation and repair of high long-term association and high score red coal enterprises, and focus on the following recommendations: China Shenhua Energy Company Limited(601088) , China Coal Energy Company Limited(601898) , Shaanxi Coal Industry Company Limited(601225) , Yankuang energy. The transformation of traditional energy enterprises under the goal of "double carbon" is worth looking forward to. It is recommended to focus on Power Investment energy (green power), Shan Xi Hua Yang Group New Energy Co.Ltd(600348) (energy storage), Huaibei Mining Holdings Co.Ltd(600985) (new materials, green power) and Yankuang energy (new materials, green power). Actively layout the national reform in Shanxi, and focus on recommending Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) with expected asset injection.
Risk tip: Indonesia's export restrictions failed to be implemented, the downstream demand was lower than expected, and the coal price plummeted.
