The Indonesia Coal Mining Association (ICMA) has called for domestic coal mining companies to cut thermal coal production this year due to weak coal prices coupled with diminishing demand from both domestic and export markets, including India.
The government of Indonesia has set the country’s coal production target this year at 550 million tonnes (mn t), lower than realized production in 2019 at 616.16 mn t. The official data of ministry of energy and mineral resources stated that the realized production as of June 24 was 257.38 mn t, or 46.80% of total target.
Hendri Tan, Deputy Chairman V of ICMA, stated that Indonesia thermal coal export is heavily weighted toward India, its second largest buyer in 2019. However, Hendri showed that India’s coal import has drastically dropped since the lockdown policy due to Covid-19 pandemic coupled with high coal inventory in the country.
“With weak macroeconomic outlook, fundamentals are expected to be weak and since Indonesia has high exposure to Indian demand, Indonesia thermal coal supply needs to be reduced”, he said.
Hendri mentioned that the domestic coal production has been reduced by 20 mn t during Jan-May’20. “We need additional 40-50 mn t of production cut in the rest of the year”, he said.
The rationale of this production cut is, according to Hendri, the production costs of most of thermal coal producers in Indonesia are higher than the current thermal coal prices.
“Indonesian coal producers should be more realistic”, he said.
By Aditya Sinha
Leave a Reply