Coal output by Indonesia’s coal producers next year will not exceed this year’s coal output target on grounds that demand from China and India, two of the world’s largest coal consumers may soften, according to a preliminary estimate made by the Indonesian Coal Association Association (ICMI).
Such a sluggish forecast would cast a shadow on the outlook for Indonesia’s economy as it is still grappling with a depreciating currency, the rupiah against the US dollar.
“Coal output next year will not be better than (the output) for this year. The price of coal (in the domestic market) will continue to decline and demand from overseas buyers is also on the declining trend,” Hendra Sinadia, executive director of Indonesian coal association told Coalmint.
Indonesia’s coal benchmark price was set at USD 92.41/MT in Jan’19, lower than USD 92.51/MT in Dec’18. The coal price had seen a declining trend since mid year of CY18. In September the price was set at USD 104.81/MT, down from USD 107.83/MT in August, the government data showed.
Sinadia said that falling coal price coupled with flat production would hit coal producers in Indonesia. “Definitely this will affect the finance of the Indonesian coal miners,” he said. “All (coal miners) will be affected.”
Various media reports and company filing to the Indonesian Stock Exchange showed that some of Indonesian coal miners have projected a less optimistic coal production target next year. PT Adaro Energy, for example, estimated its coal production to reach 65 MnT next year, up slightly from this year’s target of around 55 MnT.
PT Harum Energy estimated to produce between 5-5.5 MnT coal more next year from this year’s target 5.2 MnT.
While PT Bukit Asam, the state-owned coal producer, esimtated to produce 27.3 MnT of coal next year, an increase of 7% from this year’s target 25.5 MnT.
Typically the energy ministry will review and approve the output target set by the coal miners. Approval will apply to miners that adopt the holders of production permit or known locally as IUP. The other system is known as holders of work agreement on coal
concession mining mamangement, or perjanjian Karya Pengusahaan Pertambangan Batubara or known locally as PKP2B.
Indonesia in September revised up its coal production target to 507 MnT this year from a previous estimate target of 485 MnT.
Sinadia said that Indonesia’s coal miners have yet to assess the coal demand from India, another buyer of Indonesian coal. “Indian market is price sensitive. So it’s difficult to see its market trend next year,” he said without providing the nature of the market.
Sinadia said that though China’s economic growth is expected to slow down a bit, coal demand from the country remains strong. “It depends of the supply and demand. But demand from China remains ample,” Sinadia said.
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