Industry worried about Bumi Resources' output increase plans

Plans by mining giant Bumi Resources to massively increase the coal output of its subsidiaries PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia (AI) are feared to put pressure on coal prices, a top mining executive said on Saturday.

According to the source, Bumi Resources planned to boost the output of KPC, based in East Kalimantan, to 26 million tons this year from 17 million tons last year and the output of AI, based in South Kalimantan, to 18 million tons from 13 million tons.

The combined 14-million-ton increase amounts to about 10 percent of Indonesia?s total coal production in 2003.

As Bumi Resources needs some time to prepare the infrastructures to increase the output, the source predicted the additional production would start entering market in the beginning of the second half year of 2004.

Meanwhile approaching the second half of the year, coal price, which is now in the increasing trend, is expected to return to normal as a result of production increases by other coal companies in the previous months. At the same time, KPC and AI will release a large amount of additional output to the market.

"This is feared to affect coal price negatively," the source said.

Nevertheless, the source believed the price of quality 6,700 kk coal will stay in range of US$35-$38 per ton in the second half year of this year.

China is suffering from a coal shortage due to a combination of big increases in domestic power demand, the closure of many small mines, mine safety issues and transport logistical problems that result in higher coal price in global market. (Alex)