Despite High Price, Coal Output Growth Limited in Indonesia

Earlier, the Energy Ministry of Indonesia had already revised its full-year 2017 coal production target from 413 million tons to 477 million tons as the rising coal price was expected to cause a boost in production.

Moreover, Bambang Gatot, Director General for Coal and Minerals at Indonesia's Energy Ministry, said many coal miners that are active with a Mining Business Permit (in Indonesian: Izin Usaha Pertambangan, or IUP) are now entering the production phase and therefore the full-year production target had to be revised.

Besides limited coal production, coal supplies under the domestic market obligation (DMO) scheme also remains far from the target. The DMO is the minimum amount of coal that Indonesia's coal producers need to supply to the local market, specifically to coal-fired power stations. This regulation, set by the government, was designed to ensure sufficient resources for the power generation program in Southeast Asia's largest economy.

This year the DMO was set at 108 million tons. However, up to 31 August 2017 only 30.8 million tons - or 29 percent of the full-year target - had been supplied to the local market.

Read more: Overview of Indonesia's Coal Industry

Based on the Energy Ministry's assumptions, the biggest Indonesian coal producers in 2017 are Kaltim Prima Coal, Adaro Energy, Kideco Jaya Agung, Berau Coal Energy, Arutmin Indonesia, and Tambang Batubara Bukit Asam.

Indonesian Production, Export, Consumption & Price of Coal:

	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Production (in mln tons)	240	254	275	353	412	474	458	461	419	477¹
Export (in mln tons)	191	198	210	287	345	402	382	366	333	369¹
Domestic (in mln tons)	49	56	65	66	67	72	76	87	86	108¹
Price (HBA) (in USD/ton)	n.a	70.7	91.7	118.4	95.5	82.9	72.6	60.1	61.8	84.2²

^{¹ government target
² January-October 2017 period
Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources}

Hendra Sinadia, Deputy Executive Director of the Indonesian Coal Mining Association (APBI), said it will be difficult to achieve the government's coal production target of 477 million tons in 2017 considering there only remain three months before the year-end. The key factor that explained relatively weak output in the first quarter and the start of the second quarter of the year was bad weather conditions that disturbed the coal production process in Kalimantan and Sumatra.

Indonesia's benchmark coal price (in Indonesian: Harga Batubara Acuan, or HBA) rose 2.13 percent month-on-month (m/m) to USD $93.99 per metric ton in October 2017. The average HBA price so far in 2017 stands at USD $84.22 per ton, up significantly from an average of USD $61.84 per ton in full-year 2016.

Indonesian Government's Benchmark Thermal Coal Price (HBA):

Month	2012	2013	2014	2015	2016	2017
January	109.29	87.55	81.90	63.84	53.20	86.23
February	111.58	88.35	80.44	62.92	50.92	83.32
March	112.87	90.09	77.01	67.76	51.62	81.90
April	105.61	88.56	74.81	64.48	52.32	82.51
May	102.12	85.33	73.60	61.08	51.20	83.81
June	96.65	84.87	73.64	59.59	51.87	75.46
July	87.56	81.69	72.45	59.16	53.00	78.95
August	84.65	76.70	70.29	59.14	58.37	83.97
September	86.21	76.89	69.69	58.21	63.93	92.03
October	86.04	76.61	67.26	57.39	69.07	93.99
November	81.44	78.13	65.70	54.43	84.89
December	81.75	80.31	69.23	53.51	101.69

^{in USD/ton
Source: Ministry of Energy and Mineral Resources}

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