Coal Mining Update: Production, Export & Domestic Consumption

05 January 2018

Source: Indonesia-Investments
https://www.indonesia-investments.com/news/todays-headlines/coal-mining-update-indonesia/item8468

Coal Mining Update: Production, Export & Domestic Consumption

Domestic coal demand in Indonesia is estimated - by the Indonesian government - to reach 114.51 million tons in 2018, up around 6 percent from estimated demand in 2017. Bambang Gatot, Director General for Coal and Minerals at the Energy and Mineral Resources Ministry, said coal-fired power plants remain the biggest domestic consumers of coal.

Although coal demand from other domestic industries is rising, it remains small compared to demand that stems from power plants. In full-year 2018 local power plants are estimated to consume 89.75 million tons of coal, or 78 percent of total estimated domestic coal consumption in Indonesia. The cement industry comes on second place with an estimated demand of 15.6 million tons in 2018, followed by the paper industry with demand estimated at 3.18 million tons.

Hendra Sinadia, Deputy Executive Director of the Indonesian Coal Mining Association (APBI), said the government's 2018 domestic coal consumption estimate is too optimistic as he detects not too significant growth, partly due to obstacles (for example land acquisition troubles) in electricity projects.

Supangkat Iwan Santoso, Director of Procurement at state-owned utilities firm Perusahaan Listrik Negara (PLN), said total cement consumption of power plants in Indonesia reached 76 million tons in 2017, up from 70 million tons in the preceding year. Contrary to Sinadia, he expects to see significant growth in domestic coal consumption this year as electricity demand is rising in Indonesia. Meanwhile, existing power plants continue to raise output capacity and therefore require more coal.

Although the Indonesian government is eager to curtail coal production in order to safeguard enough supplies for future generations (while also encouraging more domestic consumption of coal rather than simply exporting coal to other nations), Bambang Gatot said the government would allow a five percent year-on-year increase in coal production in 2018 (from production realization in the preceding year). Coal miners are encouraged to produce more coal as the coal price has been rising rapidly since the second half of 2016.

Moreover, many new coal mining companies are now set to start operations. There are now about 2,000 mining permit holders (in Indonesian: Izin Usaha Pertambangan, IUP) that have completed their feasibility studies - or construction at their facilities - and are ready to commence production. As production is estimated to rise in 2018, exports should rise accordingly, driven by Asia-Pacific demand.

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  456  477¹
Export
(in mln tons)
 191  198  210  287  345  402  382  323  308  369¹
Domestic
(in mln tons)
  49   56   65   66   67   72   76   76   91  108¹
Price (HBA)
(in USD/ton)
  n.a  70.7  91.7 118.4  95.5  82.9  72.6  60.1  61.8  85.9

¹ government target
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  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  94.84
December  81.75  80.31  69.23  53.51 101.69  94.04
Average  95.5  82.9  72.6  60.1  61.8  85.9

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

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