ICMA sees Indonesian coal production increase to continue in 2004

Indonesian Coal Mining Association (ICMA) predicts that Indonesian coal production will continue to keep increasing in 2004.

ICMA chairman Jeffrey Muljono said Indonesia will see production to increase to around 20 percent from this year?s expected production of around 112 million tons.

?The main increase would be coming from Bumi Resources? subsidiaries PT. Kaltim Prima Coal, which planned to increase production from 17 million tons this year to 14-25 million tons next year and PT. Arutmin Indonesia from 14.5 tons in 2003 to 18 million tons next year,? said Jeffrey. ?Bumi would contribute to around 10 percent production increase next year.?

Another 10 percent increase, according to Jeffrey, would be coming from other existing producers such as PT. Kideco Jaya Agung, Berau Coal, Banpu Group, Gunung Bayan Pratama Group and new producers which are expected to enter production next year such as Marunda Graha Minerals, Kalimantan Energy Lestari, Garda Tujuh Buana and Interex Sacra Raya.

Indonesian coal production had been increasing rapidly in the past 10 years, placing the country as one of the top thermal coal exporters, catering to Asia Pacific market.

Jeffery, however, expressed concern about the ever-increasing production trend. ?Increase in coal production, especially from smaller producers, which tend to sell at lower prices may one day ruin the supply-demand balance,? he said. Jeffrey therefore calls the government to somehow ?manage? production growth in line with global coal consumption growth. ?Otherwise we could some day face supply glut,? he said.

Jeffrey also predicted the higher coal price that were enjoyed by Indonesian coal producers this year would continue until at least the first quarter of next year. However, he warned that the increase in coal prices was more psychological than fundamental.

?Price increases were caused by inability of Chinese coal exporters to honor their shipment commitment to South Korean, Japan, Taiwan and The Philippines market, causing the consumers scrambling to seek for alternative supply. Once coal supply from China resumes, I think there will be correction in price,? said Jeffrey.

Jeffrey foresees that in 2004, high shipping cost will continue driven by high demand of bulk carriers, combined with scarcity of new carriers to enter the market to replace the vessels that were scrapped. ?Bulk carrier cost would continue to be high in 2004 because of China?s huge demand for bulk commodities and lack of new vessels to enter the market,? said Jeffrey.(alex)