Clyde Russell is a Reuters market analyst. The views expressed are his own.
SINGAPORE, Feb 27 (Reuters) – Many power utilities in Asia appear to be making what seems like an increasingly risky bet: that poorer quality coal from Indonesia will remain cheap and plentiful.
Generators from India to Southeast Asia and China are building or planning new coal-fired units designed to run on low-rank, sub-bituminous coal from Indonesia. Such coal has been growing in supply and currently trades at a discount of 24 percent to higher quality bituminous coal from rival supplier Australia.
But two factors are calling into the question the wisdom of building long-term projects reliant on low-rank Indonesian coal.
The first is that the Indonesian government is planning new rules and taxes designed to increase its revenue from coal mining, and the authorities appear not to mind if the result of these policies is a sharp reduction in exports.