Indonesian insurance rules that come into effect today are being blamed for huge coal supply backlogs, with numerous ships being prevented from loading their cargo, as authorities conduct checks to determine if the vessels comply with the regulations.
In mid-2018, the Indonesian government required exporters of coal and palm oil to obtain cover from local insurers beginning February 01. By May 2020, exporters will also be required to use Indonesian shipping companies, Reuters reported.
Indonesia is the world’s largest exporter of thermal coal, with 25 million to 30 million tonnes per month headed to its main customers – India, China, Japan, and South Korea. Thermal coal is used mostly in electric power generation.
According to Hendra Sinadia, executive director of the Indonesian Coal Mining Association, there will be a month-long trial period where exporters that do not comply with the insurance rules will not be penalised.
Sinadia was quoted as saying by Reuters that “exports won’t be disrupted” and that it was “business as usual.”
However, coal traders said that the new insurance rules have already caused a substantial backlog in Kalimantan, a major coal-mining region in Indonesia, with over two dozen ships waiting outside the port.
“It is pretty chaotic at the moment,” a trader said. “Some shippers haven’t prepared their new insurance, others have, but the authorities and insurers are slow to register.”
