New HBA formula to be applied in January
Thursday, December 3 2015 - 01:46 AM WIB
The ministry initially expected the new formula to be implemented in September of this year.
Director for Coal Management and Development at the ministry, Adhi Wibowo said on Wednesday that the draft of the new HBA formula has been completed, but has yet to be approved by the Directorate General of Mineral and Coal.
Adhi said that under the new formula, the weighting of the Indonesia Coal Index (ICI) is increased from 25 percent to 50 percent, while the weighting of two other indices New Castle Export Index and New Castle Global Coal Index, are each maintained at 25 percent. The Platts59 Index is no longer used in the new formula as it doesn?t reflect the price of the majority of Indonesia?s coal output, which is low to medium calorie coal.
The government hopes that the new formula will help increase the price of coal produced by the country, the world?s largest exporter of thermal coal, as it would be less influenced by international factors. Experts, however, said that new formula would have little effect in increasing the coal price as it is affected by supply and demand factor. The global coal market is currently in an oversupply sand weak demand situation.
Adhi said that the new HBA formula is expected to lift the price of Indonesia?s low to medium-rank coal by US$0.8 to $1 per ton.
Adhi said that the government is also designing an alternative pricing scheme, which is based on a formula of production cost plus margin. This scheme will be applied when the HBA coal reference price turns down to below production cost.
He declines to say what the margin will be, but added that the margin for coal to be used in mine mouth power plants will be set at about 25 percent. (*)