RI to cut down coal output to help stabilize price
New export rule scheduled to be effective today
Wednesday, October 1 2014 - 01:22 AM WIB
Sukhyar said on Tuesday that the move is expected to help stabilize the price of the commodity, which has been under severe pressure for the past couple of years due to weaker demand particularly in China, the world?s largest consuming nation.
Indonesia is the world?s largest thermal coal exporter. Production this year is expected to reach around 421 million tons, according to government officials, the bulk of which to be exported particularly to China and India. Coal at Australia?s Newcastle port, the benchmark in Asia, stood at around $73 per ton in August, the lowest rate since 2009.
Meanwhile, Sukhyar said that the Indonesian coal benchmark price (or HBA) stood at $69.69 per ton in September, down from $81.90 per ton in January.
?Of course, the planned production cut will be coordinated with the industry association and industry players. Our objective is to help shore up the price so that it would not further go down,? Sukhyar said. ?We hope the price not to further decline because many have suffered losses.?
He acknowledged, however, that implementing the production cut policy would not be easy as miners have obtained permits from the government to produce coal. The country?s coal production is mostly produced by large miners holding the so-called PKP2B coal contracts of work. Of the total 73 holders of PKP2B contracts, 55 have already been in production stage.
Despite being a significant supplier of thermal coal, a drop in Indonesian production is unlikely to have a direct impact on the world?s coal market, according to IHS? Diyana Putri Alan.
?Current oversupply does not only stem from Indonesian production but also from other countries. Unle?ss other countries enact similar similar policies, a cut in Indonesian coal production will take a longtime to affect the price," she said as quoted by The Jakarta Post.
Indonesia is estimated to hold 120.5 billion tons of coal, which is just 0.6 percent of the global supply. Despite the small figure, the country has seen a massive increase in coal production in recent years and output is mostly sent abroad. Even during a period of depressed coal demand due to the recent global economic crisis, Indonesian exports continued to grow, thanks partly to rampant illegal coal mining activities.
In a bid to help curb illegal coal mining activities, and to preserve coal reserves for future domestic use, the government has introduced a new policy, effective October 1, requiring coal exporters to be registered with the Ministry of Trade and have the necessary export permit.
To be able to be registered and have the necessary export permit, miners and traders must meet requirements set by the Ministry of Energy and Mineral Resources.
Bob Kamandanu, Chairman of the Indonesian Coal Miners Association (ICMA) met with the ministry on Monday, appealing for the government to delay again the implementation of the new export mechanism policy, which was originally intended to be effective September 1, to give more time for the miners to fulfill the necessary requirements.
It remains unclear whether the government will make another delay.
Meanwhile, The Jakarta Globe reported Tuesday that the implementation of the new export policy, scheduled to start today, is expected to reduce Indonesia?s coal exports by between 15 percent and 20 percent in October from September and could decline 5 percent this year as firms scramble to obtain the export permits.
The paper said many miners and traders have encountered delays and there is a backlog of firms yet to be registered.
Indonesia, the world?s top thermal coal exporter, shipped between 25 million and 30 million metric tons of coal in September, according to the ICMA. Previously, the ICMA had said it expected shipments to drop 14 percent to 300 million tons in 2015 as a result of the new rules, coupled with China?s import restrictions. (*)