Bangkok Indonesia started the new year with a shock for the global energy markets: The world’s largest exporter of steam coal announced that it would completely stop deliveries of the raw material abroad for a month. The government cited acute bottlenecks at local electricity producers and the threat of blackouts in Southeast Asia’s largest economy as the reason for the sudden export ban.
Major buyer countries reacted with concern: “The sudden export ban is having a serious impact on Japan’s economic activities and people’s daily lives,” the Japanese embassy complained in a letter to the Indonesian Ministry of Energy. The country imports around two million tons of coal from Indonesia every month.
The South Korean government called energy suppliers together for an emergency meeting and demanded that Indonesia lift the export ban immediately – a demand that the Philippines joined on Monday.
Indonesia is not the only export country that is causing unrest with export restrictions on world markets. A number of emerging countries have issued new export bans and ceilings in the past few weeks: Thailand no longer allows pig exports, Russia is reducing the supply of wheat, and China is causing difficulties for buyer countries with export restrictions for an important chemical – both in agriculture and in the Gas stations.
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With the measures, the respective governments want to cushion problems caused by price increases for their own population. But economists see the foreclosure policy as a threat to the global economy, which threatens to exacerbate global shortages even further.
In the long term, there is a threat of distortions from the export bans
Export bans such as the one on coal from Indonesia have global consequences: Immediately after the coal export ban began, traders in Asia reported a sharp rise in prices: In China, steam coal rose by six percent the day after the decision.
The Indonesian export restrictions are themselves an indirect reaction to increased world market prices: the country’s mine operators are actually obliged to sell a quarter of their production to local energy suppliers. The Jakarta government has set an upper price limit of $ 70.
Since the coal companies were able to charge many times as much on the world market in recent months, they ignored this obligation on a large scale: According to government information, more than 400 mining companies did not sell any coal on the local market last year. The result: an acute supply bottleneck at the state energy supplier PLN.
The export ban was initially able to alleviate this: within a week, PLN received commitments for almost 14 million tons of coal – the amount secures energy production for several weeks.
“In the short term, export bans can certainly work from the point of view of the respective countries,” says Alexander Sandkamp, an expert on trade policy at the Kiel Institute for the World Economy (IfW). “In the long term, however, there is a threat of upheavals both for the country itself and for the global economy as a whole.”
Sandkamp fears a vicious circle: “If the export bans lead to supply problems, it becomes more likely that other countries will also introduce export restrictions.”
The economist also sees undesirable side effects for the governments that are now restricting exports: Anyone who bans exporters from doing business overnight will lose their attractiveness in the international competition for locations. At the same time, export restrictions would reduce the incentives for manufacturers to expand their production volumes. This would stand in the way of a solution to the bottlenecks.
Thailand and Russia want to limit the rise in food prices through export bans
This effect is likely to be felt in Thailand, which is currently struggling with sharply rising food prices. The residents of the capital Bangkok get inflation on the Roadside food stalls Every day: a large number of them have increased their prices by around ten percent in the past few weeks – the dealers point out that, given the rise in wholesale prices, they have no other choice.
The price of pork in particular has risen sharply – from the equivalent of just under four to over six euros per kilo within a few weeks. The government in Bangkok then imposed a three-month ban on exporting live pigs earlier this month.
Above all, the price of pork has risen sharply in Thailand – from the equivalent of just under four to over six euros per kilo within a few weeks.
(Photo: Getty Images)
However, this does not change the causes of the crisis: Many pig farmers in the country were recently forced out of the market after demand collapsed due to the absence of tourists in the wake of the corona pandemic. With the rising cost of feed, breeding was no longer profitable for them. The fact that the government is now trying to lower prices with export restrictions should not exactly increase their willingness to re-enter the market.
When trying to counteract rising food prices on its home market, Russia is also relying on export restrictions: Shortly before the turn of the year, the world’s largest wheat exporter announced a lowering of the export ceiling for grain to eight million tons, which should apply until the end of the first half of the year.
China’s export restrictions are a burden for farmers and drivers around the world
China recently demonstrated how quickly export restrictions can develop into a problem with global effects. Due to an acute shortage, the country restricted the export of synthetically produced urea – an important fertilizer – in the autumn. In India, for example, China’s largest urea buyer, the decision was compounded by a fertilizer crisis that led to furious protests from farmers.
But the shortage was also felt by car and truck drivers who use the exhaust gas cleaning agent Adblue – a urea solution: The export restrictions in China, the world’s most important supplier of the chemical, not only led to higher prices: In Australia, freight forwarders warned of a standstill in December their vehicle fleets, the Adblue supply should not be restored. A special delivery from Indonesia finally helped.
Even in the current coal crisis, Indonesia now wants to approach its buyer countries. Following protests from Japan, South Korea and the Philippines, the Jakarta government announced that it would gradually lift the export ban early. 14 ships that were already fully loaded were waiting on Wednesday for official approval to start their voyage.
More: Thailand is preparing for an end to mass tourism.