Saturday, March 19, 2011

Japan Quake to Have Little Impact on Indonesian Coal

Indonesian coal shipments to quake-hit Japan are being redirected to China because of delays and damage at ports, the Indonesian Coal Mining Association said on Friday. 

Two of Japan’s largest utilities, Tokyo Electric Power and Tohoku Electric, declared force majeure on some coal deliveries due to shut power plants and damaged port facilities, with other utilities also expected to declare force majeure. 

“A couple of our members are being asked to redirect vessels to the southwest part of Japan, but then there is a limit to those ports accepting spill-over coal,” said Bob Kamandanu, the chairman of the association, also known as the APBI. 

“A couple of ports have already declared force majeure. A couple of vessels have also been redirected. It could be to China because China is still short.” 

He did not give details, but Kamandanu said the damaged northeast Japanese power plants together use about 10 million tons of coal per year. He expected the quake-hit ports to be out of action for a minimum of six months. 

Japan imports around 90 million tons of coal each year, mostly from Australia, with Indonesian coal accounting for about 30 million tons. 

“If we’re talking six months of consumption for them to recover or fix everything, we’re talking five million tons being disturbed here,” he said. “Then we have to find out how much is Australian and how much is Indonesian.” 

As much as 12.4 gigawatts of atomic power, or 25 percent of capacity, was severely disrupted by the quake, Goldman Sachs said on Wednesday. 

Coal generation, which accounts for 16 percent of Japan’s electricity, is already near maximum levels, UBS and JPMorgan Chase said this week. 

“We know there is 10 gigawatts of nuclear offline, and that is about 30 million tons of coal required,” said Mark Pervan, an analyst at ANZ. “The bottom line is they don’t have 30 million tons of additional capacity in coal.” 

Japanese utilities can use an extra 5 million to 10 million metric tons of coal by running their plants at 95 percent of capacity, Pervan said. Japan imported about 184 million tons of both thermal and steel-making coal in 2010, Ministry of Finance data show. 

“We see that the coal-fired power plants are at full capacity and buyers have long-term coal contracts already, leaving no room for additional supplies,” said Supriatna Suhala, executive director of the APBI. “We don’t see the disaster in Japan affecting coal demand from Indonesia.” 

Japanese power stations use mostly high-grade coal, while Indonesia produces mainly low-grade material. For this reason, Kamandanu said Indonesian coal producers had not been approached by Japanese buyers to supply additional material. 

He said high-grade coal was produced and shipped to Japan by a few companies in Indonesia, such as Berau Coal Energy. 

Earlier this week, Japan asked Indonesia to supply more liquefied natural gas and oil after the 9.0-magnitude earthquake crippled several power plants. 

Indonesia’s chief economic minister, Hatta Rajasa, said on Thursday that Japan had not yet asked for more coal supplies, although the APBI has said it stands at the ready to provide supplies if Japan asks for them. 

“There is going to be more coal to be sold out of Indonesia elsewhere other than Japan,” Kamandanu said. “Quantity-wise, it will not be too significant. [Japan] only wants high-quality coal.” 

He added that Australian and Chinese producers were better candidates than Indonesia to supply more coal to Japan. Coal prices in the region have dropped in the wake of the quake and shutdowns of Japan’s coal-fired plants. 


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