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Indonesian coal output rising in 2018 on high and stable price

Coal News - Published on Fri, 29 Jun 2018

Image Source: Indonesia Investments
Indonesian Investments reported that this year’s coal production in Indonesia is likely to top last year’s figure of 461 million tonnes. In fact, coal production in 2018 may also exceed the production quota that was set by the Indonesian government as the nation’s coal miners are eager to boost coal production amid stronger coal prices. Starting from 2015 coal prices have been in an upward trend; a trend that is continuing to date. Through the Energy and Mineral Resources Ministry the Indonesian government targets a total coal production figure of 485 million tonnes in full year 2018. Key reason why the government wants to limit coal production is to safeguard enough supplies for future use, especially for domestic use.

However, Bambang Gatot, Director General for Coal and Minerals at the Energy Ministry, said he would not be surprised to see actual coal production exceeding the quota this year, particularly as there are many Mining Business License-holders on Kalimantan and Sumatra who are eager to generate profit after experiencing tough times in recent years. Moreover, it is not rare at all for coal miners to not follow the government’s coal production quota.

Meanwhile, the government’s 2018 coal production quota is actually much higher than the target that was set in Indonesia’s National Medium Term Development Plan 2015-2019. In the RPJMN 2015-2019 the government targets coal production at 406 million tonnes in 2018, followed by 400 million tons in 2019. The rapidly recovering coal price, however, made it basically impossible for authorities to push coal production down to those levels.

Moreover, the government is not too strict in curbing companies’ coal output. Currently, the only strategy it uses to limit coal output is by disapproving mining companies’ annual Work Plan and Budget. Still, Gatot said that if the government would not intervene at all then Indonesia’s total coal production would probably touch 600 million tonnes per year.

Meanwhile, those domestic coal miners that supply at least 25% of their output to the domestic market under the domestic market obligation program (at a fixed uncompetitive price of USD 70 per ton) are allowed to exceed the production target (set in their RKAB) by 10 %.

Mr Hendra Sinadia, Executive Director of the Indonesian Coal Mining Association, said coal production in Indonesia has actually declined in the first quarter of 2018 amid bad weather conditions and declining demand from China. However, he still expects coal production to touch a high figure in the remainder of the year on the back of the higher coal price.

According to data from Indonesia’s Energy and Mineral Resources Ministry, a total of 145 million tons of coal was produced in the January to May 2018 period. Exports reached 105 million tons, while 40 million tons were supplied to the domestic market.

Indonesia’s benchmark thermal coal price managed to rebound in June 2018 after falling in the two preceding months. The HBA, a monthly price that is determined by Indonesia’s Energy and Mineral Resources Ministry, was set at USD 96.61 per tonne in June 2018, up from USD 89.53 in the preceding month.

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Posted By : Joykumar Irom on Fri, 29 Jun 2018
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