Indonesia’s Minister of Energy and Mineral Resources Arifin Tasrif has issued new Ministerial Regulation No. 11/2020 on the third amendment of Ministerial Regulation No. 07/2017 regarding the procedure to determine the benchmark price on the sale of metal mineral and coal.
According to the new ministerial regulation, signed by Arifin on 13 April 2020, metal mineral miners and coal miners including those holding the IUP production operation mining business license (IUP OP) and IUPK special mining business license (IUPK OP) are required to, respectively, use the HPM (metal mineral benchmark price) and HPB (coal benchmark price) as benchmark in selling their output.
The requirement to use the HPM or HPB must also be applied when selling their output to affiliates.
The HPM or the HPB are determined based on a number of considerations including market mechanism and/prevailing price in the international market; increasing domestic value added of the metal mineral or coal; and implementation of good mining practices.
Nickel miners holding the IUP OP or IUPK OP licenses are required to use the HPM in selling their nickel ores including to affiliates. Smelter operators purchasing the nickel ores from these miners are also required to make the purchase using HPM as benchmark, the regulation says.
The formula to determine the HPM is based on a number of variables including purity of the metal mineral, constant factor, HMA (mineral reference price), corrective factor, treatment cost, refining charges, and/payable metal, the regulation says.
The HMA is determined based on metal mineral price indexes published by the London Metal Exchange; London Bullion Market Association; Asian Metal; Indonesia Commodity & Derivatives Exchange; Jakarta Futures Exchange; dan/or others.
The formula to determine the HPB of steam/thermal coal is based on a number of variables including calorific value of the coal; HBA (coal reference price) of steam/thermal coal; moisture content; Sulphur content; and ash content.
The formula for HPB of coking coal is determined by variables including HBA of coking (metallurgical) coal; coke strength after reaction; volatile matter; moisture content; Sulphur content; and ash content.
The HBA is determined based on a number of price indexes among others Indonesian Coal Index/Argus Coalindo; New Castle Export Index; Globalcoal New Castle Index; Platts Index; Energy Publishing Coking Coal Index; and/ IHS Markit Index.
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