Update COVID-19 in Indonesia: 70,736 confirmed infections, 3,417 deaths (9 July 2020)
6 July 2020 (closed)
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Indonesia’s reference thermal coal price hit another all-time low. The Ministry of Energy and Mineral Resources set the September coal price (in Indonesian: Harga Batubara Acuan, or HBA) at USD $58.21 per metric ton (FOB), down 1.6 percent from the August reference rate, and the fifth consecutive month of decline. Indonesia is the world’s largest thermal coal exporter.
Indonesia’s reference thermal coal price (HBA), which is set each month by the Energy Ministry, is calculated by taking the average of the following four indices: the Platts Kalimantan (5,900 kcal/kg), the Argus-Indonesia Coal Index 1 (6,500 kcal/kg), the Newcastle Export Index (6,322 kcal/kg), and the global COAL Newcastle Index (6,000 kcal/kg). The HBA forms the basis for determining prices of 73 Indonesian coal products, sold domestically or abroad, as well as for the calculation of coal royalties.
Conditions remain tough for Indonesian coal miners with little hope for a rebound in coal prices on the short or middle term due to persistent concern about a global supply glut in combination with weak coal demand from China, the world’s largest coal consumer (due to the country’s hard landing, stricter environmental rules, and government support for local miners). Recently, the Indonesian Coal Mining Association (APBI) stated that almost 80 percent of Indonesian coal miners have temporarily ceased coal production as the production cost margin turned negative (meaning that they lose money when producing and selling coal products).
In the first half of 2015, Indonesia’s coal exports fell 18 percent (y/y) to 186.8 million metric tons, while the nation’s coal production was down 15 percent (y/y) to 232.9 million tons over the same period. Meanwhile, domestic coal demand in Indonesia has dropped slightly this year, primarily on lower demand from state-owned utilities company Perusahaan Listrik Negara (PLN). Earlier this year, the Indonesian government cut its coal production target for full-year 2015 from 425 million tons to 400 million tons.
Indonesian Production, Export and Consumption of Coal:
in million tons
Source: Indonesian Coal Mining Association (APBI)
Meanwhile, a recent study conducted by Harvard University and Greenpeace Southeast Asia claims that Indonesia's coal-fired power plants are responsible for an estimated 7,100 premature deaths per year. This figure could rise to 28,000 per year provided that the government of Indonesia continues its quest to establish over one hundred new coal-fired power plants in Southeast Asia’s largest economy, leading to an increase of pollution across the nation. Earlier this year, Indonesian President Joko Widodo announced that Indonesia is set to build an additional 35 gigawatts of new power plants, 22 gigawatts of which is envisaged to be generated by coal-fired power plants.
In late August 2015, Widodo launched the construction of the USD $4 billion Batang plant in Central Java, a 2 GW coal-fired power plant that is planned to start operations in late 2019. The construction of this plant is highly controversial as dozens of local residents still refuse to give up their paddy fields. However, Widodo decided to push for construction of the plant as land acquisition issues are a notorious obstacle that have led to the delay or cancellation of many infrastructure projects in Indonesia and therefore erode foreign investors’ confidence in Indonesia’s investment climate. The case with local landowners will be settled in court.
The Batang plant will be operated by Bhimasena Power Indonesia, a joint venture created by Indonesian coal miner Adaro Energy and Japan’s Itochu Corporation and Electric Power Development Co. Ltd. (J-Power).
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