Coal output exceeds target, domestic consumption remains weak

The country?s coal output in 2014 has exceeded the government?s target of 421 million tons as production per mid-December had reached 435 million tons, Bisnis Indonesia reported Wednesday.

?Production in November reached 405 million tons, and by end December it could probably reach 458 million tons. The current position is 435 million tons,? said Bambang Tjahjono, Director for Coal Management and Development at the Ministry of Energy and Mineral Resources as quoted by the paper.

He said that about 82.53 percent of the country?s coal production went for the export market, with the remainder consumed at home.

Indonesia is the largest export of thermal coal in the world. Strong coal production from producers like Indonesia has further undermined the global coal market, where price of the commodity has tumbled due to a combination of excess supply and weaker demand.

The ministry has set a target for the country?s coal production this year to be around 450-460 million tons.

Meanwhile, The Jakarta Post reported that while the country?s coal production last year continued to grow, domestic consumption remained low, indicating snail?s pace development of power plants in Southeast Asia?s largest economy.

Only 17 percent of coal produced last year, or as many as 76 million tons, was distributed to the domestic market, or far below the allocated domestic market obligation of 95.5 million tons, according to ministry data.

?The low absorption is due to purchase delays on account of power plant development delays. Electricity sector absorption is around 80 percent of the total domestic allocation,? Director General of Mineral and Coal R. Sukhyar said.

Meanwhile, the Indonesian Coal Mining Association (ICMA) reiterated its earlier call for the government to delay a planned hike in coal royalty of miners holding the IUP mining permit given the current weak price of the commodity.

ICMA Deputy Executive Director Hendra Sinadia was quoted by Bisnis Indonesia as urging the government to stick to an earlier agreement with the association to put on hold the planned royalty hike until coal price recovers.

Sukhyar told the paper that the government was considering to raise the royalty tariff of the IUP coal miners by up to 13.5 percent as part of efforts to meet the higher non-tax revenue target from the mining sector this year.

The government has previously announced plan to increase the coal royalty tariff of IUP miners from 3,5 and 7 percent to 7, 9, and 13.5 percent, depending on the calorific value of the coal by amending Government Regulation No 9/2012. The government said that the royalty tariff would be raised once the HBA coal reference price set by the government recovered to the threshold level of US$80 per ton, a level seen as too low by coal miners, who demand the threshold be increased to $100 per ton. (*)