The Minister of Energy and Mineral Resources announced on Thursday that domestic market obligation (DMO) coal price would be capped at USD 70 per metric ton (MT) for next year, bowing to a request by state utility company PT Perusahaan Listrik Negara (PLN).
Minister of energy and mineral resources Arifin Tasrif also said that DMO would be set at 25 percent of the total coal production by the country’s coal miners. The two regulations, which were to expire this year, will continue to stand to keep the coal price stable, minister Arifin stated further.
The energy and mineral resources ministry has said earlier this month that total amount of coal sold under the Domestic Market Obligation (DMO) was set at 155 million tons (MnT) next year, 21 percent higher than this year’s target of 128 MnT.
The state electricity company Perusahaan Listrik Negara (PLN) would take 109 MnT of coal sold domestically, the manufacturing industry would absorb 16.52 MnT and cement industry 14.54 MnT.
Acting president director of PLN Sripeni Inten Cahyani submitted a proposal in August this year asking the government to cap the DMO coal price at USD 70 per metric ton (MT) for next year.
The Indonesian government applied the domestic market obligation (DMO), introduced last year, to ensure that domestic requirements for the nation’s electricity supply are met before the country’s coal cargoes are diverted to the seaborne export market because of higher price realization.
The DMO policy mandates local coal mining companies to allocate at least 25% of their annual production for domestic buyers — with much of this coal delivered to coal-fired power plants, mainly operated by PLN.
For this year, Indonesia has set its coal production target at 530 MT this year. Around 402 MT of that production target would be sold to overseas market and that the other 128 MT would be sold to the domestic market.
In 2018, the country’s coal miners produced 557 MT of coal, out of which 442 MT was sold to export markets and the remaining 115 MT was sold in domestic market under the DMO mechanism.
Indonesia’s coal prices have continued on a declining trajectory throughout the entire year. The Indonesian government set the coal benchmark price (HBA) for December at USD 66.30/MT. This current price was higher by 0.04% on a month-to-month basis as compared to 65.27/MT in the previous month of November 2019. But it’s lower by 28.3 % on a year-on-year basis, as compared to USD 92.51/MT in the month of December 2018.
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