Indonesia's Coal Production Projected to Rise Due to Increased Foreign Demand
Indonesia's coal production is projected to increase 4.4 percent to 400 million tons this year, up from the government's initial forecast of 390 million tons. According to Bob Kamandanu, chairman of the Indonesian Coal Mining Association (Asosiasi Pertambangan Batubara Indonesia, APBI), this growth will be spurred by increased demand from Japan, South Korea, Thailand and Taiwan in June. The coal price is expected to increase accordingly in the middle of the year.
Kamandanu identifies an interesting trend over the last five years. Initially, foreign demand for Indonesian coal was mostly aimed towards coal with a heating content between 5,000 and 5,500 kilocalories per kilogram. Now, however, foreign demand is more and more focused on coal with a heating content of 4,200 kcal/kg or 3,800 kcal/kg, of which Indonesia has abundant reserves. This means that foreigners are adjusting power construction in their home countries to be able to receive supplies from Indonesia.
Kamandanu also stated that domestic consumption of Indonesian coal remains weak compared to Indonesia's coal exports. This is caused by a delay in several steam power plant projects of state-owned Perusahaan Listrik Negara (PLN), private power producers, and power plants projects based on public-private partnerships (PPPs). Currently, the biggest domestic coal consumer is PLN.
According to Kamandanu, the government should adapt its domestic market obligation (DMO) of coal to meet the specific regional context. Indonesia's two main islands of coal production are Kalimantan and Sumatra. For Sumatra, the DMO should be higher as coal supplies from Sumatra are more aimed towards the country's electricity generation, while Kalimantan's coal production can be more oriented towards East Asian export markets, and thus requires a lower DMO.
(map) Major Coal Production Sites of Indonesia
1. South Sumatra
2. South Kalimantan
3. East Kalimantan
In Q1-2013, Indonesia's coal production stands at 93 million tons. Demand for Indonesian coal is expected to remain under pressure in the first two quarters of 2013 due to a coal oversupply from India.
Indonesia is one of the world's largest producers and exporters of coal. The main export destination countries for its coal are China, India, Japan and Korea. Coal has a clear importance for Indonesia's state revenue as the commodity accounts for around 85 percent of mining revenue.
To read a detailed outline of coal mining in Indonesia, please visit our coal section