Australian Coal Wins Attention, But Indonesian Exports To China Have Fallen The Most

There has been much talk in recent weeks and months about Chinese coal policy, particularly with regard to imports from Australia, after anecdotal evidence suggest Chinese importers have been told to shun Australian thermal coal.
But what does the data say?

Chinese coal imports were certainly down in October, falling to 13.7 million tonnes from 18.7m in September and 25.7m in October 2019. This marks the sixth consecutive month in which coal imports have been lower this year than last.

The drop in imports are not just limited to Australia. In fact, both in percentage and absolute terms, imports from Indonesia fell by more than those from Australia in October. Imports from the former fell by 75.4% (-8.6 million tonnes), whereas those of Australian coal fell by 60.4% (-3.8 million tonnes).

 

As Mongolia rise to top spot, seaborne transportation falls

Adding to the headache for shipping is the fact that Mongolia and Russia took over as top coal exporters to China. In fact, the drop in imports from Indonesia and Australia means that Mongolia took the top spot as China’s main coal supplier in October, with imports totalling 3.9 million tonnes, 20.4% higher than in October 2019. Russia jumped to second spot at 3.5 million tonnes (+28.3%). Mongolian coal exports to China are not transported by sea and the majority of Russian coal arrives by rail, further lowering the tonne mile demand generated by Chinese coal imports, which is already low due to the short sailing distances from Australia and Indonesia.

Surprise? Australia best performing in the first ten months of the year

Despite all the chatter, between January and October, Chinese coal imports from Australia have been record high at 77.4 million tonnes, a 7.6% increase from the same period last year. This is the equivalent of 775 Post-Panamax loads (100,000 tonnes). Russia is the only other major country to have seen growth in the first ten months of this year, at 29.5m tonnes (+1.3% from 10M 2019) and overtaking Mongolia for third spot, though it still has a long way to go to catch up with Indonesia or Australia.

Despite a 14.4% drop in coal imports from Indonesia in the first ten months of the year, it remains by far the largest origin for Chinese coal imports. Between January and October, China imported 110.2 million tonnes of coal from Indonesia, down 18.5m tonnes (185 Post-Panamax loads).

 

With new deal imports will continue to come by sea, but sailing distances will fall

With rumours rife about substitutes for Australian coal, a deal was recently announced between China and Indonesia. China is said to have agreed to buy around USD 1.47 billion worth of coal from Indonesia in a three-year time frame. The Memorandum of Understanding is light on details and several key details are yet to be agreed upon, such as the actual volumes to be exported in 2021 and beyond, and a price index that can be negotiated regularly.

The deal must be put into context. In the three years between 2017 and 2019, China imported USD 20.3 billion worth of coal from Indonesia, an average of USD6.8b a year. At just USD 1.47 billion, this deal formalises only a small proportion of this deal and is a long way from making up for lost volumes from Australia.

“Though still light on details and highly symbolic, this MoU is a clear signal from China that it is strengthening its ties with its other major coal suppliers, and that it will not suddenly return to large-scale buying of Australian coal when the calendar shows 2021,” says Peter Sand, BIMCO’s Chief Shipping Analyst.

Despite the limited scope of the deal, it brings both good and bad news for shipping. The good news is that exports from Indonesia travel by sea, rather than by land, as is the case for coal arriving from Mongolia and Russia. The bad news is that the sailing distance is short, affecting tonne mile demand.
Source: BIMCO, Peter Sand, Chief Shipping Analyst

 

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Govt receives additional 1 million doses of Sinopharm vaccine

Indonesia received another shipment of 1 million doses of the Sinopharm vaccine last week, bringing the country’s supply to 2 million total doses. The vaccine shipment was transported by Garuda Indonesia’s freight and cargo service in 24 sealed containers weighing a total of 10,224 kilograms

The Sinopharm vaccine is intended for use in the government’s “Gotong Royong” (mutual cooperation) vaccination scheme, under which private businesses may purchase vaccines from the government for inoculating their employees. The scheme aims to accelerate the pace of Indonesia’s vaccine drive, especially in vaccinating the productive population.

Mining giant PT Freeport Indonesia is among the companies that is organizing a vaccination program for its employees, including employees at its subsidiaries, in Jakarta, Jayapura and Mimika. The company has ordered 75,000 vaccine doses under the Gotong Royong scheme, with 11,000 doses set to arrive this week.

Freeport vice president for government relations Johnny Lingga said the company would be prioritizing employees who had many direct interactions with people on daily basis, such as truck drivers and security guards, as they were at greater risk of contracting the virus.

One day before the Sinopharm vaccine arrived, the government received 1,500,800 doses of the AstraZeneca vaccine through the multilateral COVAX Facility. Foreign Minister Retno L.P. Marsudi said the shipment’s arrival was solid proof of the government’s COVID-19 response.

“Securing vaccines amid the global competition is not easy. But the government will continue [with its efforts] and work hard to secure all the vaccines needed,” she told a virtual press briefing on Thursday.

To date, Indonesia has secured 94,728,400 vaccine doses from three manufacturers. China’s Sinovac has been the biggest contributor with 84.5 million doses, followed by AstraZeneca’s 8,228,400 doses via the COVAX Facility, and Sinopharm with 2 million doses.

The three vaccines are on the Emergency Use Listing (EUL) of vaccines approved by the World Health Organization (WHO), so their quality, safety and effectiveness are scientifically proven.

According to the latest WHO report, the number of confirmed COVID-19 cases around the globe has reached over 175 million, with COVID-19 deaths totaling around 3.8 million. The Southeast Asian region has seen an increasing number by 4.2 percent during last week, with a cumulative tally of more than 4.1 million confirmed cases.


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Indonesia shipping logjams expected to worsen after Ramadan

JAKARTA — With the coronavirus-induced shortage of shipping containers wreaking havoc on cargo transport to and from Indonesia, companies operating in the country expect further disruptions to their supply chains during an upcoming holiday to mark the end of Ramadan.

Demand for furniture, electronics and other household items has surged during the pandemic as more people bunker down at home, fueling a global container shortage. Efforts to curb the spread of the virus at ports have lengthened loading and unloading times, exacerbating the logistical logjam.

Maritime shipping rates are double to triple the average from the past decade, a majority of Japanese logistics providers operating in Indonesia said in a survey by the Japan External Trade Organization. Rates for shipments from Asia to North America began rising around July, followed by those to Europe around November.

Companies face a hefty increase in shipping costs, if they can even secure the containers they need at all.

One Japanese trading house said both its imports and exports are affected. The company is negotiating with business partners to raise prices or delay its deliveries in response to the rising costs. Clients are more likely to accept a price hike for high-value-added products such as auto parts, the company said.

A manufacturer said it has been asked to pay more for shipping.

“We don’t have a choice but to accept higher rates so our shipments get to their destination as planned,” an executive with the manufacturer said. But some of its clients have struggled with the corresponding rise in prices, canceling orders or asking that they be pushed back.

If a shipment cannot be delayed, companies often have paid more to fly the items to their destination. But accepting a delay creates other types of issues, like the added costs of storing and managing the items for a longer time.

Japanese companies had expected the container shortage to ease after the Lunar New Year holidays, a major shopping season in China and other parts of Asia, in mid-February. But with no clear end in sight to the coronavirus pandemic, demand from consumers stuck at home is expected to remain high.

They are now preparing for the next big hurdle: Lebaran, the festival also known as Eid al-Fitr, which marks the end of Ramadan.

Lebaran, which falls this year in mid-May, is a major holiday in Indonesia, whose population is nearly 90% Muslim. Imports usually surge around the holiday, and the container shortage compounded with increased traffic at Indonesia’s ports could pose a challenge for logistics providers.

Many companies are shoring up inventory ahead of Lebaran to prepare for anticipated shipment disruptions.

“We’re expanding efforts to supply items from multiple countries, and to find new suppliers within Indonesia,” said an executive at a Japanese manufacturer.

 

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The Indonesia freight and logistics market is expected to witness a CAGR of 10.27% during the forecast period (2020 – 2025)

The land transportation service industry in Indonesia may continue to develop gradually. Furthermore, this development is likely to be attributed to the ever-increasing demand, as the price of logistics is rapidly accelerating, which accounts for 29% of the burden on Indonesia’s GDP.

New York, Feb. 09, 2021 (GLOBE NEWSWIRE) — Reportlinker.com announces the release of the report “Indonesia Freight and Logistics Market – Growth, Trends, COVID-19 Impact, and Forecasts (2020 – 2025)” – https://www.reportlinker.com/p06020210/?utm_source=GNW

Logistics using land transportation services are still the mainstay of the transportation services industry, with around 90% of logistics in Indonesia involving land transportation. The limited number of vehicles becomes an obstacle, which can be overcome by the overload in the transportation of goods (Over Dimension and Overload – ODOL).

Road transport accounts for 70-80% of the total freight volume handled annually within the Indonesian borders. In value/currency terms, the share of the road freight market stayed between 40% and 50% of the total logistics market size.

Road transport is the lifeline for the movement of goods for such a large population. Areas, such as Java and Bali, depend mostly on road transport. In case of Bali, majority of freight movement is connected to the development of the hospitality industry’s projects and tourist consumption. Movement of goods within the small islands is more expensive than receiving the goods by sea from other islands and countries.

Key Market Trends

Growing E-commerce in the country

Indonesia has the largest population in Southeast Asia by far, and its e-commerce penetration is still very low, making it one of the hottest e-commerce markets in the world. Attracting both global and local companies’ interests, Indonesia now has a fast-growing e-commerce scene and is poised to become a global powerhouse.

E-commerce is expected to expand in high double digits in the future in Indonesia. Although the market is not as mature as e-commerce in Malaysia or Singapore, the Indonesian population of more than 260 million makes the absolute numbers of growth in the country high, with millions of new online shoppers every year.

The gross merchandise volume (GMV) for online transactions is predicted to reach USD 130 billion by the end of 2020. This growth of e-commerce is a major driver for the cross-border and domestic road freight logistics market growth.

Increasing Trucks to support increasing demand for road freight transport

The population of freight trucks is expected to grow to 50% every year in the next few years. The growth was due to the support of the improvement of toll road infrastructure and the expansion of factories of large companies.

The performance of these business services will be even greater if inter-modal synergies, namely cooperation between trucking service companies and ship and railroad transportation companies, also occur, because the process of shipping goods will reach a wider area between regions and islands.

However, government policy support is needed to facilitate truck transport mobility, so that the intensity and volume of trips also increase. Among the policies needed is monitoring the weighbridge, which is placed directly at the entrance and exit of the industrial area, given the flow of traffic in and out of trucks in places.

Competitive Landscape

The Indonesian freight and logistics industry does not have a high level of industry concentration, especially with regard to the international players. International players are responsible for approximately 30% of the market size. The remaining 70% is made up of local players. Within the 70%, the concentration is medium, and even the 10 largest players do not make up for more than 30% of the local market. This can be attributed to the fact that the large players are more focused on freight transport and logistics infrastructure, and hence, are more than just logistics infrastructure providers.

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