Indonesian supply may decrease by 10%

Asian coal prices have fallen close to the production costs of some miners, while prolonged weakness may force some high cost producers in Indonesia to shut and reduce supplies by about 10 percent, Reuters recently reported.

Thermal coal prices have slumped more than a quarter since October, to US$ 92 per ton FOB, on globalCOAL's Australian Newcastle Index, following supply glut in Asia, along with weaker demand from China, which dragged coal prices to their lowest in nearly two years, squeezing producers' margins.

Eko Natalina, marketing director at PT Berau Coal, stated at Coaltrans conference in Bali that ?The average production cost of low rank coal, sub bituminous and bituminous coal in Indonesia was hovering at around USD 40, USD 60 and USD 80 a ton respectively.?

?Last year, when miners were planning their production for 2012, many were bullish and expected prices to be high. So they would have increased the strip ratios and have more processing or washing, which would have driven up the cost of production,? he said.

Should benchmark Australian steam coal prices fall below $90 a ton for a prolonged period, some higher-cost producers in Indonesia could be forced out.

?We could see up to 10 percent of supply decrease from Indonesia,? Michael Soerijadji VP Marketing of PT Adimitra Baratama Nusantara stated in the same conference.(*)