IEEFA’s report “High coal prices could boost Indonesia’s energy transition” authored by Ghee Peh highlights that coal prices will likely stay elevated given conflict-induced changes to trade flows. Due to disruptions in shipping schedules, Korea and Japan are likely to buy less Russian coal and substitute with coal from Indonesia and Australia, hence coal prices are likely to stay high. IEEFA’s deep dive into the Indonesian coal sector finds that the eight companies are not reinvesting into new coal capacity.
While this is not surprising, considering the 185 global financial institutions which have clearly stated that they will no longer support coal or coal power plant financing, a lack of new coal supply may mean coal prices continue to stay elevated, putting the onus of energy transition on potential buyers. In the event that there is conflict resolution, coupled with the EU’s commitment to decarbonize, coal prices are likely to normalize from current levels longer term. Coal companies should not miss the opportunity now to diversify away from coal before the cost to transition gets higher.
Read the report here