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China's energy shortage has helped Indonesian markets


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As coal exports propel Southeast Asia's largest economy, the Rupiah is leading regional currencies higher.

 

Indonesia's currency and stock markets are soaring as a result of a worldwide energy shortage, with record coal prices and rising demand from power-hungry China.


China's benchmark coal price has risen to $150 per tonne, up from around $90 per tonne at the start of June, supporting the country's mining companies as the country ramped up coal imports to alleviate an energy crisis that has prompted it to resort to power rationing.

 

South-east
China is now the world's largest coal importer, with imports reaching a record of more than 21 million tonnes in September, up from 17 million in August.
China has agreed to buy $1.5 billion in thermal coal from Indonesia in 2021, after banning Australian coal last year.


The coal boom has coincided with Indonesia's larger economy defying forecasts of a long-term recession, which has afflicted its neighbours.

 

Despite a disastrous outbreak of the Delta coronavirus strain this summer, the country's growth has rebounded to pre-pandemic levels, and the rupiah has been Southeast Asia's best-performing currency since the beginning of September.
According to economists, inflationary pressures are also the least pressing in the region.


According to Trinh Nguyen, a senior economist at Natixis, Indonesia has emerged from an economic slump and is currently in a "sweet spot."
Unlike the rest of the area, its commodity exports outnumber its manufactured exports, putting it in a better position to gain from a commodity supply deficit.

 

"China's growth is slowing, but it is still growing.
"Energy demand will persist, which would benefit Indonesia," she said, referring to China's sluggish economic growth.

 

The energy shortage has driven up the stock prices of Indonesia's coal companies, putting many of them back on pace to make a profit after losing money last year.


Bumi Resources, the country's largest producer, has had its stock gain over 40% since the beginning of September, while Adaro Energy and Indika Energy have seen their stock rise 31% and 50%, respectively.

 

Bumi made a $1.9 million profit in the first half of 2021, compared to a net loss of $86.1 million the previous year, while Indika made a $12 million profit in the first half of this year, up from a loss of $21.9 million the previous year.


However, excessive rain has hampered the ability of local businesses to increase production.
The weather "has been the primary restraining factor in growing output this year," according to Bumi, whose biggest importer is China.


The company said it would keep its 2021 output target of 83 million to 87 million tonnes, up from 81 million tonnes last year.

 

Steel producers have also benefited from growing demand in China.
Gunung Raja Paksi, Indonesia's largest privately held steel producer, stated 90 percent of its output was sold domestically, but that figure was likely to shrink to 50 percent in the coming years.

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