Indonesia, the world’s top exporter of thermal coal, is using diplomatic channels to promote sales around the region, from Vietnam to Pakistan and Bangladesh, a government spokesman said, as it seeks to offset a fall in annual exports and a global shift towards cleaner energy.
While Vietnam’s growing appetite for thermal coal is unlikely to match that of sizeable markets like China and India, the country is emerging as a key market and experts say it is important to get in early. Thermal coal is used by power plants to generate electricity.
“In this current condition, we need to secure non-traditional markets for our future growth,” said Hendra Sinadia, executive director of the Indonesian Coal Miners Association (ICMA).
As part of such efforts, he said the government recently organized virtual meetings between Indonesian miners and Vietnamese buyers.
“We are geographically advantaged and our coal quality matched Vietnam’s needs,” he said.
Indonesia’s coal exports fell 8 percent in the first five months of 2020 compared with a year ago, according to data from Statistics Indonesia, led by a mammoth 35 percent drop to India as lockdown restrictions hit demand for power in the Asian giant.
Thermal coal exports to China rose by 31 percent to 29 million tonnes in the January-May period from the year prior, while exports to Vietnam jumped 44 percent to 8.9 million tonnes over that period.
With China’s plans to boost domestic coal production likely to curb its coal imports in coming months, Indonesia is looking to Vietnam, where coal demand is growing, to offset some of those losses.
Vietnam, which became the seventh-largest buyer of Indonesian coal in the first five months of the year, saw a huge jump in coal imports in the first half of 2020 from the year prior of more than 50 percent as it fed the country’s growing number of coal-fired power plants.
After India, Vietnam has the largest coal-fired power plant projects in terms of capacity among countries in Southeast Asia and South Asia, according to Fitch Solutions analyst Daine Loh, even as it expands renewable power sources.
There are currently more than 17-gigawatts (GW) of coal-fired power-plant capacity under construction in Vietnam while nearly 29 GWs of coal-fired plants are also in the pre-construction stage, Fitch data showed.
Indonesia’s second-largest coal miner PT Adaro Energy told Reuters last week that Vietnam had the strongest demand growth in Asia in 2020.
Despite this, Indonesian miners are planning to curb output due to falling demand for the fuel owing to the fallout of the coronavirus pandemic. ICMA said earlier this month its members would cut 2020 production by between 15-20 percent from an earlier target to support prices.