Govt hopes to complete new coal price formula soon

The Ministry of Energy and Mineral Resources hopes to be able to complete next month revision of the formula used to determine the government?s coal reference price, or better known as HBA.

Kontan quoted Director for Coal Management and Development at the ministry, Adhi Wibowo as saying that the revision is meant so that the HBA would no longer be heavily influenced by external factors considering that Indonesia is a major coal exporter and producer.

There will be a number of changes to the HBA formula, he said. The first is that the weighting of the indices in the HBA will be revised, increasing the weighting of the Indonesia Coal Index (ICI) from the current 25 percent, and reducing the other indices including Index Platts59 (now 25%), New Castle Export Index (25%), and New Castle Global Coal Index (25%).

The coal calorie benchmark used in the formula, currently 6,322 kcal/kg GAR, will also be revised to better reflect Indonesia?s coal qualities. There are two options: using calorific value of 5,800 kcal/kg or 4,200 kcal/kg. The latter is considered more ideal as it reflects Indonesia?s dominant coal quality: low CV coal. ?High calorie (coal) is dominated by overseas market particularly Australia, so it does not reflect the real condition of our coal,? Adhi said.

The sulphur factor in the formula will also be revised. Under the current formula, every 1 percent increase in sulphur level, price appreciates by US$0.4 per ton. The plan is to revise it to 0.4 percent. (*)