Indian Coal Secretary Anil Swarup said India's state-owned mining companies still have ample room to optimize coal production volumes. For example, Coal India Ltd, reportedly the world's largest coal producer (accounting for more than 80 percent of coal production in India), has seen sharply rising coal production volumes but in terms of productivity it still trails far behind the industry's global average. Between 31 March 2015 and 31 January 2016, Coal India's coal production rose 9.6 percent (y/y) to an unprecedented 426.3 million tons. Indian Prime Minister Narendra Modi targets Coal India's production to rise to 1 billion tons (per year) by 2020, in line with the country's quest for energy security. Optimal coal production of Coal India will be encouraged through the implementation of more efficient mining technologies.

American multinational investment banking firm Goldman Sachs Inc estimates that rising coal production in India will have curbed international coal trade by 10 percent in 2020. Besides optimizing output at state-owned coal miners, the Indian government also makes efforts to build new coal mines and open the coal mining industry to private investors.

Goldman Sachs also stated in a recent report that it downgraded its long-term coal price outlook to USD $42.50 per ton as the decline in long-term coal demand appears to be irreversible. Meanwhile, the World Bank sees coal prices fall to USD $50 per ton in 2016 amid weak demand and excess supply.

The fate of coal prices is also heavily determined by global crude oil prices. As oil prices may increase on the short-term due to expectation of an "oil production freeze" pact between OPEC and Russia as well as expectation that the US Federal Reserve will not raise its benchmark interest rate again in the next four months (hence giving rise to a weaker US dollar, thus supporting global commodity prices).

Further Reading: Overview of Indonesia's Coal Industry

For Indonesian coal miners it is good news that domestic coal consumption is estimated to grow due to the development of coal-fired power plants across the Indonesian nation. It will not be enough, however, to make up for weak global coal demand.

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  376
Export
(in million tons)
 163  191  198  210  287  345  402  382  296
Domestic
(in million tons)
  61   49   56   65   66   67   72   76   80
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    50.92
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

Bahas