Coal buyers spooked by Indonesia's new shipping rules -Assoc

Golden Agri-Resources

08/02/2018 09:33

By Bernadette Christina Munthe 
    JAKARTA, Feb 8 (Reuters) - Buyers of Indonesian coal are 
holding back orders of the fuel after the government issued new 
shipping rules for coal and crude palm oil that would restrict 
exports to Indonesian vessels, an industry association said on 
Thursday. 
    Jakarta issued rules in October requiring coal and palm oil 
exporters to use Indonesian-flagged vessels and Indonesian 
insurance companies, to boost the role of the archipelago's 
shipping industry in its export market.  
    However, guidelines on implementing the rules and possible 
exemptions have not been released, raising concerns among 
shippers in Indonesia, the world's top thermal coal exporter and 
palm oil producer. 
    The regulation will take effect at the end of April. 
    "There was some information, several potential buyers from 
abroad put on hold making any new contracts," Hendra Sinadia, 
executive director of the Indonesia Coal Mining Association 
(ICMA), told reporters. 
    Describing the new rules as "dangerous", Sinadia said they 
could affect export volumes and state revenues if shipping 
contracts had to be renegotiated to shift to so-called cost, 
insurance and freight (CIF) contracts from free-on-board (FOB) 
contracts. 
    Under CIF contracts, the seller is responsible for the 
shipping arrangements and must buy insurance to protect the 
cargo against losses during the voyage. Under FOB contracts, the 
buyer procures the vessel and is responsible for all shipping 
costs.  
    The industry is worried that time is running out to make 
adjustments before the rules come into effect, Sinadia said, 
noting that it would be difficult to do so without the 
guidelines. 
    Indonesia Palm Oil Association (GAPKI) Secretary-General 
Togar Sitanggang said in an interview on Jan. 24 that there were 
several problems with the new rules, noting there were not 
enough Indonesian-flagged food-grade tankers, and that 
Indonesian insurers may lack capacity. 
    "If we're selling CPO (crude palm oil), free-on-board at 
Belawan port, does this mean our buyer has to use Indonesian 
vessel? That is ridiculous." 
    The palm oil industry is awaiting guidance on when foreign 
vessels can be used if local vessels are unavailable, he said. 
    "There should be no obstacles, but if we must do this and 
that, it could hold up exports," he said. 
    The new rules could add to freight costs, Sitanggang said, 
if shipping companies were unable to find cargo for their return 
trips to Asia.  
    "If their ships are empty, of course they'll ask for a 
higher price from us." 
    According to Oke Nurwan, Director General of Foreign Trade 
at the Ministry of Trade, while most domestic shipping uses 
Indonesian-flagged vessels very little is exported on Indonesian 
ships. 
    "It can't be like that any more," Nurwan said on Jan. 25, 
adding that the government wanted the domestic shipping sector 
to compete more with multinationals.  
    "If (the government) didn't intervene there would be no 
trigger, so we made it mandatory," he said. 
 
 (Reporting by Bernadette Christina Munthe; Writing by Fergus 
Jensen; Editing by Christian Schmollinger) 
 ((fergus.jensen@thomsonreuters.com; +62 21 2992 7604; Reuters 
Messaging: fergus.jensen.thomsonreuters.com@reuters.net)) 
 
Keywords: INDONESIA SHIPPING/CABOTAGE