RI coal producers face problems in competing in EU market

Rising freight costs and geographical disadvantage have made it very difficult for Indonesia’s coal poducers to compete in the European Union (EU) market, the biggest coal market in the world, Bisnis Indonesia newspaper reported in its Thursday edition.

Indonesian Coal Society director Singgih Widagdo said the surge in freight costs were mainly due to macro conditions in the international trade including the rise in China’s iron ore imports.

With an annual economic growth rate of 8.2 percent, according to Singgih, China must increase its iron ore imports by 25 percent. Last year, China’s iron ore imports reached 140 tons.

“This situation has badly affected world’s coal trade. Since most of the shipping armada is concentrating on China, the costs for the remaining (if any) ships became very expensive,” Singgih told the Bisnis in Jakarta on Wednesday.

The high costs had hampered Indonesian coal producers’ efforts to diversify their export destination to Europe. Besides high freight costs, the geographical position of Indonesia’s ports, which are spread throughout the country are also became a hurdle in increasing the total volume of coal exports, he added.

“So, it is very difficult for Indonesia to compete for European market especially with producers like Colombia, South Africa and Russia, whose geographical location is close to Europe,” he said.

There is also another factor of low calory coal. Because Europe needs high-calory coal and Indonesia’s coal has low to medium level calory, Singgih explained.

As per the Barlow Jonke EU’s total coal imports in 2003 reached 133 million tons, the largest in the world. The next biggest importers were Japan (100 million tons), South Korea (50 million tons) and Taiwan (45 million tons). (*)