- Indonesian miners and shippers seek clarity on what it means by Indonesian-controlled ship.
- Just 8.8% or 63 of the 717 coal ships plying the region are Indonesian flagged.
- Fear of losing to suppliers in other regions mounts amid a global oversupply of coal.
- ICMA continues to appeal for a deferment of the May 1 implementation.
- Impossible for enough international trading ships to transfer to Indonesia flags to meet the requirement.
Indonesia’s new shipping rules creates panic amongst Coal suppliers and shipping companies, reports Platts.
What is the new rule?
From May 1, Indonesia requires use of local Indonesian-controlled ships for exports.
Lack of clarity
Indonesian thermal coal suppliers and shipping companies are worried as the May 1 implementation of a requirement to use local ships for exports draws closer.
Market sources said, the reason for their worry is that the government is yet to define what it means by Indonesian-controlled ship.
What is the issue?
According to Platts, just 8.8% or 63 of the 717 coal ships plying the region are Indonesian flagged.
Obligation enforcement
According to Indonesian Coal Mining Association (ICMA)
- The country’s Ministry of Trade announced the requirement to use Indonesian insurance and ships for exports in 2017.
- The obligation implementation got postponed due to the very limited capacity of national vessels to transport coal, which is commonly sold on an FOB basis.
- The subsequent delay of the implementation to May 1, 2020, was to enable details of the plan to be ironed out.
Export disruption
Lack of technical guidelines
The association said its members were concerned that coal exports could be disrupted given the increasingly limited time and lack of technical guidelines provided to facilitate the implementation.
Overseas buyers
ICMA said its members were worried that they may lose overseas buyers.
Members fear that they might lose to suppliers in other regions amid a global oversupply of coal.
Lack of definition
According to a source, the Ministry of Trade had met with Indonesian coal miners to explain the May 1 changes. But no definitions for Indonesian-controlled ships was provided.
Register under Indonesian company
As there is no clear definition till now to what classifies a ship as Indonesian controlled, market sources feel the most practical solution for ship owners would be to register their ships under Indonesian companies.
Deferment appeal from ICMA
The ICMA said it was continuing to appeal for a deferment of the May 1 implementation.
Will not be beneficial
Indonesian National Shipowners’ Association had a meeting with the ICMA and the ministry recently.
In the meeting, Shipowners Association said, shipping rules without clear technical guidelines will not benefit shipping companies.
He added, “In shipping operations, anything in the grey zone would hurt shipping companies in terms of liability of shipping charges.”
Zero-sum game
He added saying that there is so much gap to bridge in implementation and it could be a zero-sum game for the Indonesian shipping industry and Indonesian coal mining industry.
Price surge fear
Market sources were concerned about the potential for a price hike for Indonesian ships, as well as potential for the attractiveness of Indonesian coal to be impacted by the implementation.
Meeting requirements
According to a sources –
- Due to lack of clarity, coal buyers from Japan and Malaysia have cancelled shipments from May onwards.
- There will be an oversupply of coal without a home domestically in Indonesia, which could hit the country’s local industries.
- Demand for Indonesian ships will surge and Indonesian coal will no longer be attractive to China.
- There are just hundreds of ships, from Capesize to Supramax, shipping coal out of Indonesia monthly due to limited Indonesian flag ships.
- It would be impossible for enough international trading ships to transfer to Indonesia flags to meet the requirement.
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Source: Platts
