Coal Mining Update Indonesia: Coal Prices Continue to Rise
Indonesia's thermal coal price (in Indonesian: Harga Batubara Acuan, abbreviated HBA), a monthly price set by Indonesia's Energy and Mineral Resource Ministry and based on both domestic and global coal prices, rose 9.5 percent month-on-month (m/m) to USD $63.93 metric tons in September 2016, touching the highest level since April 2015. The recent rally is caused by supply cuts in combination with rising coal demand from China. Regarding the near-term, thermal coal prices are believed to have more upside room due to the approaching winter season.
The reason why coal production in China has fallen and thus there exists more demand for coal imports is that Chinese authorities have been eager to curtail coal production as it strives to meet environmental accords. The world's second-largest economy (as well as the world's second-largest greenhouse gas emitter after the United States) cut the annual statutory working days for coalmines from 330 to 276 days in order to ease the structural overcapacity. Meanwhile, the winter heating season should give a boost to electricity demand, thus boosting coal demand.
However, on the long term, there still exists plenty of pessimism about the trend of coal prices due to the global supply glut. Although China is now trying to combat a supply glut, it will be increasingly difficult for the country to limit coal production when coal miners' profit margins continue to improve. Moreover, nations around the globe are more and more trying to cut their emissions, implying that the use of coal for power generation is becoming less popular. Instead, nations are increasingly focusing environmentally friendly energy sources.
Indonesia's HBA price is based for 25 percent on the Platts Kalimantan (5,900 kcal/kg gross-as-received assessment), 25 percent on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR), 25 percent on the Newcastle Export Index (6,322 kcal/kg GAR), and 25 percent on the globalCOAL Newcastle index (6,000 kcal/kg NAR).
Read more: Coal Mining in Indonesia
The HBA price forms the basis for determining prices of 75 Indonesian coal products as well as for the calculation of royalties that need to be paid by Indonesian coal miners to the government.
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 | 51.62 |
| April | 105.61 | 88.56 | 74.81 | 64.48 | 52.32 |
| May | 102.12 | 85.33 | 73.60 | 61.08 | 51.20 |
| June | 96.65 | 84.87 | 73.64 | 59.59 | 51.87 |
| July | 87.56 | 81.69 | 72.45 | 59.16 | 53.00 |
| August | 84.65 | 76.70 | 70.29 | 59.14 | 58.37 |
| September | 86.21 | 76.89 | 69.69 | 58.21 | 63.93 |
| 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