Despite weather-related problems at the beginning of the year, Indonesia's total coal production is expected to increase to 400 million tons this year, up from the previous estimate of around 370 million tons. Domestic consumption of coal has always been small in Indonesia, thus about 70 to 80 percent of domestic production is exported, in particular to China and India. As a whole, the country's mineral sector (that includes coal mining) contributes about 12 percent (US $93 billion) to Indonesia's gross domestic product (GDP).

In January 2013, the Indonesian government said not to continue with a law draft that foresaw in the prohibition of low-grade coal exports (with the intention to lift coal prices). Miners would have needed to upgrade its coal's heating value first before export was allowed. However, this policy was eventually abandoned as it would have stopped mining activity in the country. Technology for upgrading the low-grade coal is lacking in the country and, moreover, domestic demand is not big enough to absorb current production rates.

The graph below shows the combined stock performance of the largest Indonesian coal mining companies:

The coal mining basket above involves the following companies: Adaro EnergyBerau Coal EnergyTambang Batubara Bukit AsamBumi ResourcesIndo Tambangraya Megah, and Harum Energy. Its combined stock performance is highly similar to the global coal price movement.

Indonesia is one of the world's largest producers and exporters of coal. Since 2005, when it overtook Australia, the country is leading exporter in thermal coal. A significant portion of this exported thermal coal consists of a medium-quality type (between 5100 and 6100 cal/gram) and a low-quality type (below 5100 cal/gram) for which large demand comes from China and India. According to information presented by the Indonesian Ministry of Energy, Indonesian coal reserves are estimated to last around 83 years if the current rate of production is to be continued.

Bahas