Taking on Indonesian coal

HOGSBACK reckons that Indonesia is Australia’s biggest competitor when it comes to the seaborne market coal export stakes.
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For that reason, it makes sense to capture some of the mining action going on in Indonesia through the supply of Aussie mining technology and expertise.

In 2018, Indonesia exported 394 million tonnes of coal - mostly to nearby Asian customers such as China. During that same period Queensland exported 223Mt and New South Wales exported 164.6Mt. By Hogsback's reckoning, Australia's total exports are just under 7Mt under that of Indonesia with 387.6Mt.

The Department of Industry, Innovation and Science's latest Resources and Energy Quarterly report said thermal and coking coal export values would reach $67 billion in total in 2018-19.

Australia's coal is better quality with lower ash and it exports more metallurgical coal to North East Asia but we cannot afford to be too smug about our place in the global mining and equipment market place.   

There are a couple of Australian companies who are in Indonesia either mining coal on a contract basis like Thiess or mining coal on their own tenements like Cokal.

However, it might be time for Australia to clinch a more favourable trading relationship with our large and rapidly growing northern neighbour across the Timor Strait.

The Minerals Council of Australia supports the Joint Standing Committee on Treaties recommendation to ratify Australia's free trade agreement with Indonesia.

This agreement will grow Australia's trade in minerals and mining services, helping to create new Australian jobs and boosting the Australian economy, according to MCA CEO Tania Constable.

Reducing barriers to trade and opening new markets is critical to supporting all Australians and will also provide an important buffer to economic and protectionist pressure, she said.

Australia needs free trade agreements to support and grow resources exports, which reached a record of $273 billion in 2018-19 and accounted for 58% of Australia's total exports.

Liberalised trade with Indonesia will increase trade and investment, benefiting Australia's minerals industry and the Mining, Equipment, Technology and Services sector.

Indonesia has agreed to reduce tariffs on iron ore and steel, which are as high as 20%, to 5% or less by 2025.

Indonesia will also allow Australian businesses to own up to 67% of mining services companies based in Indonesia - the first time Indonesia has ever made such a commitment in a trade agreement, providing significant opportunities for more than 140 Australian METS companies which export to Indonesia.

Hogsback reckons it's time for the Australian coal industry and its suppliers to be smart in its dealings with Indonesia and the government should clinch agreements that help the local industry to benefit from Indonesia's inexorable rise.