China’s Coal Imports Rise as Rail Work Limits Domestic Supply

China’s coal imports in April rose to the
highest in four months as power producers were seen boosting
overseas shipments to replenish stockpiles after railway
maintenance limited domestic deliveries.
Inbound shipments by the world’s largest consumer of coal
were equivalent to about 826,000 tons a day, according to
Bloomberg calculations based on data from the General
Administration of Customs on Monday. That’s up almost 16 percent
from the previous month and the most since December.
China’s power producers have turned to overseas deliveries,
which are up 33 percent during the first four months of this
year, amid government mining restrictions that helped imports
last year expand at the fastest pace in four years. Inbound
shipments likely accelerated further last month after work on a
key rail supply line limited domestic shipments, according to
the China Coal Transport and Distribution Association.
“Inventories were quite low amid tight domestic supplies,”
Deng Shun, an analyst with GF Futures Co., said before data were
released. “Power plants should have increased purchases last
month to replenish stockpiles.”
China’s benchmark Qinhuangdao coal price was at 619 yuan a
ton, CCTD reported Monday, the lowest since March 6. Prices will
stabilize at around 550 yuan a ton this year, UOB Kay Hian
analysts said in an e-mailed note.
The Datong-Qinhuangdao railway started 25 days of
maintenance on April 6, CCTD said on its website last week. On a
monthly basis, China imported a total of 24.78 million metric
tons in April, the data Monday showed.

RI Says It’s Ready for First Nuke Power Plant

As the government completes preliminary studies and prepares human resources to build and operate the country’s first nuclear power plant, it is keeping its options open for countries to invest in the project.

The country established the Nuclear Law in 1997 as a legal basis to build a nuclear power plant, but attempts to realize it have been hampered by environmental concerns, especially following the Tohoku earthquake and tsunami that led to the Fukushima nuclear disaster in Japan.

A recent visit by the International Atomic Energy Agency (IAEA) in mid-September boosted Indonesia’s confidence after the agency concluded that the country had a high level of readiness to carry out the environmentally friendly program.

The National Nuclear Energy Agency (BATAN) said it had studied two strategic locations for the plant — in Bangka Belitung province and in Jepara, Central Java — both of which are low earthquake risk areas compared to other regions in Indonesia, also known as part of the Pacific Ring of Fire that is prone to earthquakes and tsunamis

Bangka is considered strategic to meet electricity demand for both Sumatra and Java, while Jepara is another option, should the plant be designed only to support Java.

Nuclear plants, if finally built in Jepara and Bangka, could each produce more than 1,000 megawatts (MW) of power.

“Nuclear power plants [PLTN] are a political decision. We will stick to the President’s decision [on the matter],” BATAN chief Djarot Sulistio Wisnubroto told The Jakarta Post.

BATAN has briefed President Joko “Jokowi” Widodo with regard to which country Indonesia should work with to establish its first nuclear power plant. The countries on the table are Russia, South Korea, France, China, the US and Japan.

BATAN has also carried out a capacity building program with Rusatom Overseas, a subsidiary of Russian state corporation Rosatom to assist the country in preparing the project.

A nuclear power plant takes around seven to 10 years to build and Indonesia risks missing its target to fulfill 19.6 percent of its total energy demand by 2025 with new and renewable energy, as recorded in the country’s national energy plan, if it fails to start building its first nuclear plant by 2017, at the latest.

Nuclear is one of several new energy options that will contribute to achieving the 19.6 percent target.

By 2025, the government hopes 50.3 percent of electricity generation will be fueled by coal, 29.4 percent by gas, 0.7 percent by petroleum-based fuel and the remaining 19.6 percent by new and renewable energy sources. “If we assume that the establishment of the PLTN will take around seven to 10 years, then the nuke decision has to be made soon,” Djarot said.

Funding will be a huge barrier for Indonesia to kick off its first nuclear project, as it is estimated that a nuclear power plant would cost around Rp 60 trillion (US$4.62 billion) to Rp 70 trillion for a 1,400-MW power plant.

Nuclear Energy Regulatory Agency (Bapeten) deputy for permits and inspection Khoirul Huda said the IAEA had concluded that Indonesia had the adequate regulations and infrastructure to build its first nuclear power plant.

“The response [from the IAEA] is positive. It only suggests that all relevant institutions in Indonesia increase coordination and communications with regard to the nuclear plan,” Khoirul told the Post.

Bapeten said there were several technologies considered by Indonesia to materialize its nuclear plan, including a light-water reactor (LWR), advanced heavy-water reactor (AHWR) and nuclear coolant reactor.

Bandung Institute of Technology (ITB) geologist Benyamin Sapiie said Bangka and Jepara were located in regions that had strong terrains, making them less prone to earthquakes. “According to current data on long-term stability of the regions, there is nothing that could potentially cause a big earthquake in those places. Jepara is located near a volcano, but there is no earthquake risk in the region,” Benyamin said.

Jonan, Arcandra Back in the Saddle

“[…] I am sure the two, once again, are figures with competence. Although I know both are stubborn, they like going into the field,” President Joko “Jokowi” Widodo said on Friday, regarding Ignasius Jonan and Arcandra Tahar.

The President was providing the rationale for his decision to reappoint Ignasius and Arcandra as Cabinet members, less than three months after both were removed from their positions.

In a surprise move, Jokowi announced and later inducted Jonan as energy and mineral resources minister and Arcandra as his deputy.

Jonan was sacked from his position as transportation minister in the latest Cabinet shake-up in August, a move that many deemed as punishment for his penchant for putting stumbling blocks in the way of Jokowi’s policies, including the Jakarta-Bandung high-speed railway network construction.

Arcandra was removed from his position as energy and mineral resources minister after only 19 days in office following a controversy surrounding his US citizenship.

Although Jokowi cited Jonan and Arcandra’s professionalism and skills, traits that are essential for carrying out “sweeping reform” at the graft-ridden ministry, many considered the decision ill-advised given that second fiddle Arcandra has far more extensive knowledge on the oil and gas sector than his boss.

Jonan has zero experience in oil and gas as well as the mining sector. He gained his reputation as the no-nonsense director of state-owned railway company KAI and was credited with revamping the country’s railway services, which is believed to be one of the reasons Jokowi picked him to be transportation minister.

Jokowi told reporters after the swearing-in ceremony that his decision to pair Jonan and Arcandra “was for the sake [of bringing better] management” to the Energy and Mineral Resources Ministry, hinting that collaboration between the two figures would be crucial.

In an apparent show of unity, Jonan and Arcandra traveled together in an official chauffeured vehicle from the State Palace to the Energy and Mineral Resources Ministry in Central Jakarta.

Jokowi called on the public to not politicize the reappointment of Jonan and Arcandra.

“Let’s not draw it into personal issues or politics,” Jokowi said. “Although it is not an easy task, I am sure that the two, the minister and the deputy, will be able to solve current problems at the energy ministry and bring good teamwork.”

The appointment of Arcandra was made possible after Jokowi brought back the post of deputy energy and mineral resources minister, which was scrapped when he took office in October 2014.

As deputy minister, Arcandra will have no authority to issue policies, and is expected to help Jonan in drafting his future policies.

Jonan said he would rely on Arcandra in running the ministry.

“Well, I have Arcandra here,” Jonan said when asked about his ability to run the problem-prone ministry.

Arcandra, meanwhile, shrugged off the suggestion that Jokowi had tried to find ways to accommodate him in the Cabinet, saying: “The President has his own considerations when it comes to the energy ministry.”

It was apparent that the decision to reassign Jonan and Arcandra was made in haste.

They were sworn in shortly before Jokowi took off to West Kalimantan for a working visit, and visibly absent at the ceremony was Vice President Jusuf Kalla, who was on a working visit to Makassar.

Coordinating Maritime Affairs Minister Luhut Pandjaitan, who was also the interim energy minister, did not attend the ceremony.

Multiple sources claimed that Jonan and Arcandra were notified about the inauguration only hours before the ceremony took place.

In fact, Jokowi had earlier decided to appoint Jonan as the person in charge of a holding firm for state-owned companies.

Presidential spokesman Johan Budi said Jokowi had consulted a number of key players in his administration, including Kalla and Luhut, and that their absence at the inauguration was simply due to scheduling conflicts.

New Plants to Power Up Sleepless Jakarta

In an effort to cater to Greater Jakarta’s rapid development, state electricity firm PLN plans to build a number of new power plants and transmission networks worth billions of dollars in the country’s economic nexus.

Electricity demand in the area, which has seen a significant increase in the number of office buildings and residential complexes over recent years, currently stands at 10,000 megawatt (MW) per day and will increase by up to 8.5 percent every year. In particular, electricity demand for peak hours, between 5 p.m. and 10 p.m., will increase by around 400 MW each year, meaning the area needs an additional 1,600 MW by 2019, according to PLN data.

To manage this, the firm will build a number of power plants with a combined output of 3,500 MW of electricity, 500 MW in the form of a gas-based facility and coal-based power plants (PLTGU) in Muara Karang, 800 MW PLTGU in Tanjung Priok, 600 MW PLTGU in Muara Tawar, all in Jakarta and 2×800 MW PLTGU Java-1 in an undecided location, all of which are scheduled for completion in 2019.

PLN regional business director for western Java area Murtaqi Syamsuddin said the power plant in Tanjung Priok would be funded by loans from a bank syndication led by Japan Bank for International Cooperation (JBIC). He, however, did not reveal the amount of the loan commitment.

“We’ll let you know later in the loan signing on Oct. 20,” he said during the groundbreaking ceremony of a 2×500 mega-volt ampere (MVA) main station in Lengkong, Banten, on Friday.

PLN has just appointed state oil and gas operator Pertamina recently to lead the mega project PLTGU Java-1 worth Rp 26 trillion (US$2 billion). Pertamina will partner with Japanese Marubeni Corporation and Sojitz Corporation.

All the power plants are part of the government’s ambition to install additional 35,000 MW of electricity supply to the current system by 2019.

The additional power will be transmitted through transmission networks known as “Jakarta Loop”, comprising main stations and transformers looping the capital city with six main powerhouses in Tambun and Cawang in Jakarta, Gandul in West Java, Lengkong in Banten, Kembangan and Duri Kosambi in Jakarta.

“There will be less black outs with a looping system because it works better in supplying electricity,” said Murtaqi.

The frequency of black outs in Greater Jakarta area is reportedly not as common these days. However, the area is still vulnerable to power outages during heavy rain.

All of the six powerhouses have capacity of 6,000 MVA and 500 kilovolts in total. To date, only Gandul and Kembangan have been fully developed.

PLN will add another 500 MVA transformer in Cawang and build the first powerhouses in Tambun and Lengkong and dozens of smaller transmitters, all worth Rp 3.3 trillion and will be funded by PLN money. The project is scheduled to be completed by 2018.

Rp 1.4 Quadrillion Investment Needed for Clean Electricity

Indonesia will need Rp 1.4 quadrillion (US$107 billion) to meet its clean electricity target while developing the country’s large new and renewable energy potential, government estimates show.

The hefty investment would be needed to reach the government’s 23 percent target of national electricity being produced using clean energy, according to the Energy and Mineral Resources Ministry’s Directorate General for New Renewable Energy and Energy Conservation.

Directorate general secretary Dadan Kusdiana said an attractive investment climate must be developed in order to encourage foreign investment, as it was impossible for the government to amass such a large sum of money.

“What we’re trying to do now is create a good investment climate. For example, we are trying to set prices that will encourage investment. Right now, all geothermal permits are processed by the BKPM [Investment Coordinating Board]; it’s all done in one place,” he said on Monday afternoon.

New and renewable energy sources have been neglected throughout the years in favor of fossil fuel despite the potential large reserves in the country.

However, government commitment to cleaner energy has been pledged again amid the depletion of fossil fuel reserves and rising awareness of the need for environmental conservation. At last year’s Paris climate talks ( COP21 ) the government pledged a carbon emission reduction target of 29 percent by 2030.

Investment in new and renewable energy amounted to $870 million in the first half of this year, 63.5 percent of the total target of $1.37 billion. The biggest chunk of that investment at $560 million went into geothermal energy.

Furthermore, non-tax revenue from new and renewable energy sources reached Rp 283.25 billion during the first six months of the year, less than half of the full-year target of Rp 630 billion. Revenue so far has been solely from geothermal energy projects.

A Rp 1.2 trillion subsidy has been approved for the Energy and Mineral Resources Ministry in next year’s budget to plug any gaps between the price of electricity from renewable sources and conventional sources that state-owned electricity company PLN cannot cover.

Despite the government’s efforts, however, the future of clean energy sources in the country looks a little bleak. In its most recent 2016 to 2025 electricity procurement business plan (RUPTL), the 23 percent target of 2025 has been decreased to 19.6 percent as it was deemed unachievable unless 3.6 gigawatts were procured from nuclear power plants.

Moreover, the ministry also announced that it would slash Rp 900 billion from its budget this year, the biggest cut being in the allocation for the Directorate General for New Renewable Energy and Energy Conservation, which will be left with Rp 1.7 trillion.

Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa said the government could not rely on investment alone to boost development. The government also needed to increase efficiency efforts, he said.

“In order to save energy, we need better technology. However, we are still highly reliant on new and renewable energy technology from abroad. On top of that, our current regulations have not been implemented well to allow for more use of these new technologies,” Fabby said.

PLN Set to Expedite 35,000 MW Project

State-owned electricity company PLN expects to speed up the signing of development contracts for the remaining half of the projects in the government’s 35,000 megawatt (MW) electricity procurement plan in an effort to push for the on-time completion of the ambitious program.

Experts and government officials alike had previously criticized PLN for slow progress in the project, which is set to be completed by the end of 2019. Most of the criticism has stemmed from the fact that only 195 MW, or 1 percent of the project, had reached its commercial operating date or was already in operation.

However, the latest data from the company shows that it is gearing up to get things done. PLN’s data show that, as of Aug. 4, the company had wrapped up development contracts for power plants with a combined capacity of 16,515 MW.

PLN hopes to complete the signing of the contract for the remaining 18,485 MW power plants by year-end. Up to 11,730 MW comprises power purchase agreements (PPA) while the remainder are PLN’s engineering, procurement and construction (EPC) contracts. Furthermore, the same information shows that PLN is optimistic that financial closure will be reached for projects amounting to 8,705 MW.

PLN director for corporate planning Nicke Widyawati said that although reaching the government’s target was important, maintaining a daily peak demand reserve of 30 percent throughout the process was of equal importance.

Furthermore, PLN was concerned that the growth of electricity demand was not growing as fast as the supply despite the government’s commitment to developing special economic zones.

“We are actually optimistic that we can deliver the 35,000 MW project, but what is more important is how to maintain a 30 percent load balance at the same time,” she said during an event on Thursday evening.

The ambitious project is aimed at increasing the nation’s electricity supply, which remains lower than any of its Southeast Asian peers despite being the largest economy.

The current operating power plants under the 35,000 MW project mostly consist of mobile power plants, including one with a 25 MW capacity in Lombok, West Nusa Tenggara. In June, President Joko “Jokowi” Widodo inaugurated a 100-MW gas-fired power plant in Paguat, Gorontalo, the first realization of the mega electrification project.

Nicke noted that the largest obstacle PLN faced in the 35,000 MW project was still land acquisition despite the company managing to acquire approximately 50 percent of land needed for the program by August.

The mega power plant project in Batang, Central Java, finally reached financial closure in June this year after facing years of land-acquisition problems, and will start operating in 2020. The project is touted to be the largest in Southeast Asia.

Meanwhile, Cirebon Electric Power (CEP) director Heru Dewanto suggested the government solve the land-acquisition problem by renting out any government-owned land to electricity companies wanting to participate in the 35,000 MW project.

“If land acquisition is so crucial, maybe the government can try to create an inventory of land owned by the central government, local administrations, state-owned companies and even the military before lending it out for power plants through a cooperation scheme,” he said.

CEP constructed the country’s first steam powered plant utilizing super-critical technology with a capacity of 660 MW. The company plans to expand the power plant and will start operating in 2020.

Committee Suggests New Coal Price Formula for Power Plants

The Energy and Mineral Resources Ministry should make changes to a ministerial regulation on coal prices for mine-mouth power plants to appease both the government and state-owned electricity company PLN, the National Exploration Committee (KEN) has said.

The ministry and PLN have been at loggerheads over the regulation, issued earlier this year, over the pricing formula for coal delivered to mine-mouth power plants, which included a margin of 15 to 25 percent of the total production cost.

As a compromise, KEN has suggested a number of revisions to the regulation, which include allowing large-scale mine-mouth power plants with 100 megawatt (MW) to 1000 MW capacity to set prices based on a business-to-business system.

“However, the control over conservation should remain in the hands of the Energy and Mineral Resources Ministry so that our reserves will not be depleted due to cheap prices that are advantageous for companies,” KEN chairman Andang Bachtiar said on Tuesday.

Meanwhile, small-scale power plants with a 7 MW to 25 MW capacity should be allowed to buy coal with a 15 to 25 percent margin as they have a small demand of only 35,000 tons to 125,000 tons per annum. However, Andang also suggested that the power plants be given an additional fee set by an independent consultant in order to ensure transparency.

Fear of overselling coal is one of the reasons the government has insisted on the 15 to 25 percent price margin. The Energy and Mineral Resources Ministry’s coal and mineral director general, Bambang Gatot Ariyono, said if the prices were reduced further, then Indonesia’s reserves could be depleted within a short period of time.

“We have to consider our reserves. If we continue to reduce the prices then our reserves will disappear. Is there any guarantee that the change will allow our reserves to be there for the next 50 years? We need a margin,” he said, adding that there were no plans to change the price margin.

PLN has claimed that margins have resulted in prices that are too high considering the low coal price experienced throughout the year. President director Sofyan Basir said the margin could be reduced even further to a maximum of 15 percent.

Coal prices continue to remain sluggish amid overproduction and slow demand from major coal importer China.

Reuters reported that the price of Asian benchmark Newcastle thermal coal went up to US$62.23 per metric ton by mid-July from its 2016 low of $47.37. However, this is still less than half the post-2008 recession peak of around $136 per metric ton in February 2011.

Meanwhile, Indonesia’s coal reference price (HBA) for July also rose to $53 per metric ton from $51.81 per metric ton the previous year.

Settling the conflict while also preserving the country’s reserves is crucial to the government’s energy plans, especially for the ambitious 35,000 MW electricity procurement project, which will rely on coal for 55.6 percent of its energy source.

Government data suggests that Indonesia had around 32.2 billion tons of coal reserves in 2014.

However, another study by the Indonesian Mining Association and PricewaterhouseCoopers shows that declining prices have made only 7.3 to 8.3 billion tons of coal economically viable to mine. The preliminary projection indicates that these reserves will be depleted within the next two decades, forcing the country to start importing coal by 2030.

KEN also emphasized the importance of hiring an independent consultant to fix the prices as this would ensure transparency between all parties.

“There must always be transparency surrounding price-fixing between the ministry, PLN and coal suppliers,” Andang said.

RI May Have to Import Coal for Future Power Plants: Study

With coal prices continuing to decline, Indonesia will struggle to provide the coal needed to fire up its power stations in the near future, a study predicts.

The government is struggling to expedite a number of power plant projects under its ambitious 35,000 megawatt (MW) generation program, aimed at supporting the country’s economic growth. 

The program expects that coal can fulfill 66 percent of the primary energy sources for power plants by 2024, which is equivalent to 361 gigawatt hours (GWh) output by coal-fired power plants. 

The study, which was conducted by the Indonesian Coal Mining Association (APBI) in cooperation with PricewaterhouseCoopers (PwC) Indonesia, however, suggests that the country’s coal-fired power plants will not be able to provide the expected 20,000 MW for the next 25 to 30 years, based on current commodity prices.

“This is due to the current commodity prices as a result of which the coal sector’s profitability has reached its lowest point and there has been a decrease in production by coal companies,” PwC’s president director advisory, Mirza Diran, said Monday in a press conference.

The government has so far been optimistic about the feasibility of the program as according to data from the Energy and Mineral Resources Ministry, Indonesia had around 32.3 billion tons of coal reserves in 2014. 

APBI and PwC’s study, however, shows that with declining coal prices throughout last year only between 7.3 and 8.3 billion tons of these reserves are economically viable to mine. This preliminary projection indicates that these reserves will be depleted by 2033-2036.

“Mining requires funds. If the price of coal is US$50, while it costs $60 to mine, then the coal will automatically not be mined. It is as if we have a decrease in reserves,” APBI chairman Pandu P. Sjahrir said. 

Coal prices have steadily declined in the past few years, amid oversupply and declining demand from major coal importer China. 

Australia’s Newcastle coal price, an Asian benchmark, dropped to $51.29 per ton, as estimated by Reuters in late February. Meanwhile, Indonesia’s coal reference price (HBA) dropped to $50.92 in February from $53.2 in January. 

The study, which surveyed 25 coal-mining companies, showed coal-producer earnings before interest, tax, depreciation and amortization had dropped by 60 percent to $2.6 billion in 2014 from $6.5 billion in 2011. It is expected to decrease by 16 percent in 2015. 

This has also caused capital expenditure to drop by around 79 percent to $400 million in 2015 from $1.9 billion in 2012, and it is expected to continue to decrease this year by 10-20 percent. Consequently, mining exploration to find new coal reserves has largely stopped. 

Pandu explained that the findings showed that there was a possibility Indonesia would have to start importing coal by 2030. “This means that we’ll have to start importing starting from around 2030, even though we have always been exporters,” he said.

PLN Pushing to Build 10,000MW Power Plants

State power firm PLN will be running on all cylinders this year to achieve the government’s ambitious electricity procurement program, aiming to break ground for a number of power plants with a combined capacity of 10,000 megawatts (MW).

PLN’s director for procurement, Supangkat Iwan Santoso, said a number of big coal-fired power plants were included in the target.

“If we talk about the capacity, the biggest will be coal-fired power plants. We are expecting the groundbreaking of the Jawa 4 power plant, the Cirebon expansion plant, the Cilacap expansion plant, the Jawa 7 and the Jawa 3 this year,” Iwan said on Thursday.

The power plant developments are part of the government’s program to supply an additional 35,000 MW of electricity within five years. 

As of December last year, PLN had agreed to purchase a total of 17,000 MW from independent power producers. Those agreements guarantee the producers that PLN would purchase the power and deliver it to customers. 

In the last two months, new power purchase agreements for around 2,000 MW have brought the total contracted electricity sales up to 19,827 MW. 

PLN aims to finalize power purchase agreements for 15,500 MW by the end of the year and the remaining capacity of almost 2,000 MW in 2017.

Following the power purchase agreement stage, 24 power producers with 5,329 MW of capacity are now closing financing before starting construction. Meanwhile, some other producers with 2,920 MW of capacity have entered the engineering, procurement and construction (EPC) stage.

Energy and Mineral Resources Minister Sudirman Said praised the progress of the government’s flagship program. 

“There are problems everywhere. However, PLN, the independent producers and local administration can solve them. We will also ensure that the power producers have funding in place,” Sudirman said.

To date, the country has a total installed power plant capacity of about 55,000 MW. The electrification ratio was at 88 percent as of the end of last year. However, there are numerous areas, particularly outside Java, with lower ratios and frequent blackouts as the demand is higher than the available capacity.

The 35,000 MW program is said to be necessary to support economic growth. In past years, similar programs failed, partly because of financing and problems in land acquisition for the would-be power plants. 

Earlier this week, the construction of the Batang power plant in Central Java gained new momentum after the Supreme Court ruled in favor of land acquisition for the project, which has been long delayed amid opposition from local people. 

Jarman, the Energy and Mineral Resources Ministry’s director general for electricity, said that the Supreme Court’s decision allowed for the land acquisition to be quickly concluded.

“As soon as the land [acquisition] is completed, financial closure can be reached,” he has said. 

The Batang project is being developed by PT Bhimasena Power Indonesia, a consortium consisting of Jakarta-listed PT Adaro Energy, J-Power Electric Power Development Co. Ltd. and Itochu Corp., which won the tender in 2011. The power plant is the first to be developed under a public-private-partnership scheme.

Bukit Asam Profits Up Despite Decline in Coal Prices

State-controlled mining company PT Bukit Asam has reported increased profits despite a year of falling coal prices.

The publicly listed miner announced that the company’s net profits had increased by 9 percent to Rp 2.04 trillion (US$153.9 million) during the January-December period in 2015, from Rp 1.86 trillion in the previous year. 

Meanwhile, total revenues rose by 5 percent to Rp 13.72 trillion by the end of the year.

The company’s coal production was up 18 percent to 19.28 million tons from 16.36 million tons last year, while its sales were up 6 percent to 19.1 million tons, the company’s recently published statement revealed. 

Domestic sales increased by 8 percent to 10.05 million tons while its exports were up 5 percent to 9.05 million tons, making up 47 percent of the company’s total sales volume. 

Meanwhile, Bukit Asam’s average selling price (ASP) during the year, according to the company’s press statement, decreased by 3 percent to Rp 707,052 per ton to Rp 723,635 in 2014. 

Coal prices have steadily declined in the past few years, amid oversupply and declining demand from major coal importer China. The situation has led to steep declines in the profits of Indonesian coal producers. 

Bukit Asam corporate secretary Joko Pramono said that the company was optimistic that it would reach its target at the end of the year to increase sales by 52 percent to 29 million tons. 

“If you see from our performance — in terms of operation and sales — it all increased. In 2016, we will continue to work together with PT KAI [state-train operator PT Kereta Api Indonesia] to support the synergy between state-owned enterprises,” he said. 

Bukit Asam revealed that the volume of coal transported by rail increased by 6 percent to 15.8 million tons last year thanks to the opening of the Tanjung Enim-Prabumulih double-track line operation. 

PT KAI is expected to increase this cargo volume by 50 percent this year to 23.7 million tons with additional locomotives and train cars. 

Meanwhile, the company is seeking to maintain its cost efficiency programs as it predicts that commodity prices will continue to decrease this year. 

Bukit Asam managed to cut its production costs by 10 percent to Rp 356,866 per ton from Rp 394,784 per ton. The company’s stripping ratio — the ratio of the volume of waste material that must be removed to retrieve coal — stood at 4.48, meaning that it had decreased from the previous year’s 4.69.

The stripping ratio is one of the determining factors in miners’ production costs. 

“We will continue the success of 2015 by involving strategies that will strengthen us. We hope that we will go through 2016 in a better condition, that we will continue to evaluate every quarter,” Joko said. 

Australia’s Newcastle coal price, an Asian benchmark, has dropped to $51.29 per metric ton, as estimated by Reuters in late February. While Indonesia’s coal reference price (HBA) had dropped to $50.92 in February from $53.20 in January.