The September reference thermal coal price declined 8.8 percent compared to the reference price of USD $63.84 per ton in the first month of the year. Compared to its peak of USD $127.05 per ton in February 2011, the reference price has fallen around 54 percent.

Indonesia, the world’s largest thermal coal exporter, continues to feel the negative impact of low global coal prices as this commodity constitutes an important foreign exchange earner. Last month, the Indonesian Coal Mining Association (APBI) stated that nearly 80 percent of Indonesian coal miners have temporarily ceased coal production as the production cost margin turned negative. Meanwhile, the Indonesian government cut the nation’s coal production target in 2015 from 425 million tons to 400 million tons.

Domestic coal consumption remained stable so far in 2015. In the first eight months of the year 52 million tons were consumed domestically (down one million ton from the same period last year), particularly by power plants and the industrial sector.

Garibaldi Thohir, President Director of Indonesian listed coal miner Adaro Energy, said the company is likely to cut production in 2016 to the range of 52-54 million tons (a seven percent decline from this year’s production target) due to the low coal price. Most of the company’s coal is sold under long-term contracts, while a relatively small amount is sold on the spot market. Adaro Energy will reduce the amount of coal that is sold on the spot market.

Last week Adaro Energy and state-owned energy company Pertamina signed a strategic alliance agreement that will supply the coal miner with almost 80 percent of its fuel needs over the next seven years, while Pertamina will be able to use a fuel terminal owned by Adaro Energy.

Indonesian Production, Export and Consumption of Coal:

     2007    2008    2009    2010    2011    2012    2013    2014
Production     217     240     254     275     353     412     474     458
Export     163     191     198     210     287     345     402     382
Domestic      61      49      56      65      66      67      72      76

in million tons
Source: Indonesian Coal Mining Association (APBI)