[China ban on Australian coal, Indonesia coal future market destination]

Prepared By Muhammad Nurman Syukur of Universitas Bina Nusantara

Summary

As a world coal importer to fulfill its energy needs, China as a world coal importer, geographically inclusive land
conditions makes this country the largest energy source for equitable development. China's national politics establishes
the ban on commodities from Australia because of the issue that causes the COVID-19 pandemic. China is influenced
by four climates, one of which is winter, which can boost coal consumption. Culturally, the Chinese coal market only
stops to celebrate Chinese New Year. As one of the largest suppliers of thermal coal globally, Indonesia can make
China an export destination in the future because of the availability of coal and geographically close to China,
especially southern China.

Objectives

The purpose of this research is to provide information related to changes in the coal market in Asia-Pacific with the
status of the ban on coal imports from Australia to China. Thus, the quota owned by Australia will benefit other coal
supplying countries such as Russia and Indonesia. As one of the largest thermal coal suppliers globally and the Pacific,
Indonesia will be a strong candidate to get the largest quota because it benefits from being in the equatorial area and is
only affected by two seasons and close enough to southern China.

Existing Knowledge

The development of the coal market to become one of the primary commodities contributing to its most extensive
foreign exchange highlights Indonesia's leading item. The increase in coal prices to reach more than 120 USD / ton in
2010 for coal above 6322 Gar is the most valuable moment for this black gold. Unfortunately, the story of this high-
priced commodity is not long enough to enjoy its golden age. In 2013, coal prices began to move in opposite directions
touching the bottom of the price at a level of around 50 USD / ton. As an Asia-Pacific coal importer, Apart from being
one of the largest coal importers, China is the owner of one of the world's largest coal reserves. Therefore, when
China's domestic market faucets are open, importers will begin to find it challenging to replace China as one of the
world's largest coal importer countries.

Price instability began to appear with the opening of the domestic market faucets in China. Import prices to China
began to fall, thus pushing the coal sales index's value to plummet. Since then, the pricing of coal has been difficult to
return to its peak. Until the 3rd quarter of 2020, the pricing of coal was still meager, although, from 2013 - 2020, there
was a period of increase, this always followed the influence of domestic import faucets in China.

At the beginning of the 2020 pandemic, coal was getting more difficult because energy consumption was not too much.
After all, factories had to be closed, and Residents were isolated, and so on. This condition makes countries' needs for
coal increasingly limited. Of course, it will push prices to fall back where supply is more significant than demand.
Prices have even touched their lowest level since 2012. It turns out that the pandemic has not only a negative impact on
the black gold price trend, Australian policy Supporting investigations of the source of Covid-19 originating from
China has led the Chinese government to establish a barrier status for commodity imports from Australia. However,
prices do not necessarily improve. Q3 2020, the second wave of COVID-19 cases, is rife in China's mining areas,
making the Chinese government close mining operations in China. The Chinese government adds the import tap while
the import ban on Australian commodities continues. Based on Figure 1, around 20% of import coal from Australia will
be ban by the Chinese government.
 Figure 1 Current level of thermal coal import by producer country

Q3 2020 is also quite an extreme winter, so the need for coal is critical so that every house has enough heating. Coal
consumption also increased compared to the previous winter. Prices started to improve very quickly, the increase in
prices from week to week ranged from 5 - 10% of the last week's pricing. The market was very volatile for the black
gold until the end of January, as Chinese buyers began to stop buying black gold after ensuring that supplies until
March were fulfilled. It is the habit of buyers in China who must ensure that the supply of coal before and after the
Chinese New Year holidays remains smooth.

The development of other energy sources also strengthens that coal will tend to decrease in the global market due to
environmentally friendly energy, which makes the projection of the coal market in the future to be saturated or even
cares to decrease. Therefore it is essential to get long-term customers who can ensure the continuity of coal suppliers in
the future. With its extensive land geographic conditions, China will make this country the enormous coal consumption
in the world for equitable development. This fact is likely to keep China as a world coal importer to meet its energy
needs.

Intended outcomes

From this market research, researchers expect entrepreneurs in the coal industry to know that China will still dominate
the development of the world coal market. So that entrepreneurs can prepare strategies to develop their industry to the
market in China. As you see in Figure 2, China's coal consumption has been growing up as the demand is higher year
after year.
 Figure 2 Chinese Thermal Power Generation year on year.

Source from Argus White Paper

Demand will impact the supply side. Increasing demand from thermal power generation in China will influence to coal
supply configuration. Even though, there are domestic market domination China still need to maintain import coal to
leverage the consumption specifically to area which more effective with sea transporter.

Target group

This research will target the existing coal industry in Indonesia so that the Industri will get the right information to
develop the industry. This development is expected to help Indonesia grow because the coal industry is one of the
sectors that support the largest foreign exchange. The Indonesian supplier will be able to penetrate China's coal market
to take advantage of China's coal ban from Australia. Figure 3 provides the outlook for Indonesia coal in China for
2021. Indonesia's tonnage had lifted to around 39.2 million tons in 2021 from 17.2 million tons in 2020.

Figure 3 China Coal Import Outlook 2021

Data collection

Researchers collect data from research related to the development of markets in the coal industry from Argus report,
McCloskey, Platss, and articles published by government and APBI (Association of Indonesian Coal Entrepreneurs).
Argus, McCloskey, Platss reports are mostly paid accounts with a very high level of confidence and are commonly
used by coal industry entrepreneurs in the world. The data chosen is a general report that is usually found on each
research platform's website page. Also, there are many public documents issued by APBI for the benefit of its
members, namely coal entrepreneurs.

Research Methodology

This study uses a bibliography of research that is then analyzed to provide accurate and reliable recommendations for
entrepreneurs in Indonesia. Given a large number of news and information resources that often overlap and their
accuracy is questionable. Researchers go to the Argus, McCloskey, Platts, Delloite, and APBI websites then select
articles related to China as the largest coal importer. Selected papers are limited to 2020 and 2021.

Ethical Considerations

The analysis of this research is taken from a trusted market research website. A limited circle of people should use it to
avoid misunderstandings if it is publicly publicized.

Further Outcomes

Through this research, it is hoped that national entrepreneurs in Indonesia can find out the coal market's future
competitors if they want to compete in China's coal market. Where the businessmen can easily segment the coal
products to be sold, determine the target coal users, and position their products to get a long-term cooperation position
with coal users in China. They are thus helping to facilitate the sales plan because one of the components of the 4P has
been measured, namely the place where the destination is the Chinese coal market.