Coal production in Indonesia fell 14.4 percent (y/y) to 392 million tons in 2015 from 458 million tons in the preceding year. Production declined due to weak global demand and the subsequent persistent weakness of global coal prices amid sluggish global economic growth (particularly China's economic slowdown). Last year, the Indonesian Coal Mining Association (APBI) said the free cash flow of many Indonesian coal miners has turned negative. A negative free cash flow is only a positive matter if it is caused by large investments that will bring returns on the long-term. However, in the case of the Indonesian coal miners, the negative free cash flow is caused by weak coal prices.

Indonesia's benchmark thermal coal reference price (in Indonesian: Harga Batubara Acuan, or HBA), a monthly rate set by the Energy Ministry, fell 0.58 percent (m/m) to a new record low of USD $53.20 per metric ton (FOB) in January 2016 from USD $53.51 in December 2015. However, the month-on-month decline is smaller than declines recorded in the preceding months. But whether this is a sign that the fall is stagnating and coal prices will soon rebound is uncertain. Demand from Indonesia's main export markets is not expected to improve significantly in the short-term. Domestic coal demand, on the other hand, may grow in the year ahead due to accelerating economic growth, growing industrial output, and new coal-fired power plants that are coming online. The economy of Indonesia is expected to expand 5.3 percent (y/y) in 2016, up from an estimated 4.7 percent in 2015.

Read Column: Analysis and Overview of Indonesia's Coal Mining Industry

Meanwhile, exports of Indonesian coal in 2015 fell 22.9 percent (y/y) to 294.5 million tons from 382 million tons in the preceding year.

Indonesian Production, Export, Consumption & Price of Coal:

  2007 2008 2009 2010 2011 2012 2013 2014 2015
Production
(in million tons)
 217  240  254  275  353  412  474  458  392
Export
(in million tons)
 163  191  198  210  287  345  402  382  295
Domestic
(in million tons)
  61   49   56   65   66   67   72   76   87
Price (HBA)
(in USD/ton)
  n.a   n.a  70.7  91.7 118.4  95.5  82.9  72.6  60.1

Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources

Indonesian Government's Benchmark Thermal Coal Price (HBA):

Month    2012    2013    2014    2015
   2016
January   109.29    87.55    81.90    63.84    53.20
February   111.58    88.35    80.44    62.92
March   112.87    90.09    77.01    67.76
April   105.61    88.56    74.81    64.48
May   102.12    85.33    73.60    61.08
June    96.65    84.87    73.64    59.59
July    87.56    81.69    72.45    59.16
August    84.65    76.70    70.29    59.14
September    86.21    76.89    69.69    58.21
October    86.04    76.61    67.26    57.39
November    81.44    78.13    65.70    54.43
December    81.75    80.31    69.23    53.51

in USD/ton
Source: Ministry of Energy and Mineral Resources

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