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Indonesia Sets Lower Coal Production Target to Help Stabilize Global Price

The government has lowered its coal production target for this year to 480 million tons in an effort to stabilize the global coal price, an official has said.

Last year’s target was 485 million tons, 25 percent of which was allocated to the domestic market obligation (DMO).

Energy and Mineral Resources Ministry mineral and coal director general Bambang Gatot Ariyono said the government considered various factors before deciding on the figure, including the movement of the US dollar.

“The goal is to maintain a good coal price,” he said, adding that there were possibilities that the government might revise the production target this year.

“We will continue to oversee the situation. Usually, coal miners will revise their production target no later than July.”

One of the reasons to revise the target was to increase state revenue, he added.

Ministry data from up to Dec. 27 shows that Indonesia reached 94.02 percent of its annual total target for 2018.

Bambang assured that a 25 percent DMO policy and a coal price cap of US$70 per ton would ensure stable electricity tariffs until the year-end.

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Coal Prices Projected to Remain Healthy in 2018

Global coal prices are expected to remain healthy throughout 2018 owing to stable demand from China and increasing consumption in India, says the World Coal Association (WCA).

WCA chief executive Benjamin Sporton projected that demand from China would continue to be reasonably strong this year, despite the country’s plan to implement a huge gasification program for households and industries to reduce its dependence on coal.

Furthermore, he said India would also increase its coal imports amid soaring demand from its power generation sector and lower-than-expected domestic production.

“India is not in a shortage situation, but it is running very closely behind it, and that’s really what has driven coal exports into India, and a good chunk of that is coming from Indonesia,” Benjamin told The Jakarta Post recently.

The price of Asian benchmark Newcastle thermal coal had climbed to US$106.78 per ton in January after falling to as low as $74.52 per ton in May last year.

“It’s really the supply constraint that sent the price to above $100 per ton over the last year, […] and I would still expect it to be somewhere in that ballpark for most of this year,” Benjamin said.

The Indonesian government has limited the country’s coal production in 2018 at a maximum level of 485 million tons, 25 percent of which will be allocated for the domestic market.

Within the first two months of 2017, Indonesia’s coal production reached 28.07 million tons, 15.6 million tons of which were absorbed by the domestic market.

Indonesia to Regulate Domestic Coal Price to Curb Electricity Costs

The Energy and Mineral Resources Ministry says it will issue a regulation on the domestic price of coal to curb production costs as the government has decided not to increase electricity rates.

The ministry’s electricity price section head, Jisman Hutajulu, said in Jakarta on Monday that domestic coal would be sold based on domestic market obligation (DMO).

“The objective of introducing the regulation is help easing the financial burden of PLN,” Jisman said as reported by, adding that the DMO was based on Energy and Mineral Resources Ministry Regulation No. 34/2009 on coal and mineral resources.

The regulation, among others, rules that the domestic price of the mineral and coal are based on the price reference of the commodity.

Under the regulation, the energy and mineral resources minister will decide the coal quota for domestic needs.

Jisman said Minister Ignasius Jonan would also revise a prevailing regulation to decide the domestic coal price after taking into account the opinions of stakeholders.

Jisman said PLN had proposed a price floor of US$60 and price ceiling of $70.

PLN previously said that rising coal prices had resulted in an increase of production costs, as around 57 percent of the company’s generated power came from coal-fired power plants.

Coal Futures Contract Provide Guarantee

Jakarta, Kompas – Futures contracts in coal trading transactions provides a price guarantee for industry players amid fluctuating commodity prices. Although quite profitable for sellers and buyers, futures contracts can make coal prices less competitive.

It was surfaced in Argus Coalindo Indonesia Coal Forum 2018, in Jakarta, Thursday (8/2). This gathering of coal industry players become a socialization event for futures contract concept in Indonesian Coal Index (ICI) for coal trading.

This was conveyed by PT Coalindo Energy CEO Maydin Sipayung. Coalindo Energy is the Indonesian Coal Index provider.

Maydin said, futures contracts become the agreed price of buyers and sellers of coal for a certain period. This changes the pricing system that has been set for a period of one year.

“The concept of futures contracts is applied because the selling and buying of coal is done in a long period of time. Because, the delivery time takes months. On the other hand the coal prices are very volatile, “he said.

Futures contract, Maydin continued, is a tools to determine the coal price for a certain period. Buyers and sellers get guaranteed prices.

Executive Director of the Indonesian Coal Mining Association (APBI) Hendra Sinadia assess, the implementation of futures contracts have a positive and negative impact. In general, the positive impact that buyers and sellers will experience is the guaranteed price.

“But, on the other hand, futures contracts make the selling price of coal has no competitiveness. When the coal prices are high, the producers cannot experience the benefit, “he said.

Head of Sub Directorate of Production and Marketing Operations Supervision, Directorate General of Mineral and Coal Ministry of Energy and Mineral Resources Hersonyo Wibowo said the coal production target this year is 485 million tons.

Government Maintains Energy Prices for Q1 2018

The Energy and Mineral Resources Ministry has announced that it will maintain the prices of electricity and certain fuel types in the first quarter of 2018, forcing state energy giants Pertamina and PLN to bear the burden of increasing oil and coal prices.

“The decision has been made to preserve people’s purchasing power,” Energy and Mineral Resources Minister Ignasius Jonan said during a media conference on Wednesday.

Subsequently, the prices of Premium gasoline, which has a research octane number (RON) of 88, and subsidized diesel fuel will be maintained at Rp 6,450 (49 US cents) and Rp 5,150 per liter, respectively. These rates have been in place since April 2016, even though the prices of global crude have been in an upward trend lately.

The price of global benchmark Brent crude reached $66.78 per barrel on Tuesday after falling to as low as $44.82 per barrel on June 21.

Meanwhile, the price of electricity for low capacity non-subsidized customers will remain unchanged at Rp 1,467.28 per kilowatt hour (kWh). Prices for mid-capacity and high-capacity will hover at Rp 1,114.7 and Rp 996.74 per kWh, respectively.

This is despite the 15.4 percent increase in the price of Asian benchmark Newcastle coal to $96.63 per ton between January and November.

Pertamina and PLN has pledged to undertake various efficiency measures to cope with the government’s decision to maintain current fuel and electricity prices.

Asian Coal Prices Hit Late 2016 High Amid Huge Shipping Congestion

Spot cargo prices for Australian Newcastle coal have risen nearly 15 percent from lows in late November after China loosened import restrictions to help meet a winter fuel shortage.

SINGAPORE: Asian benchmark thermal coalprices have pushed to their highest levels since 2016, fuelled by demand in China and loading delays in Indonesia that have ramped up shipping congestion outside major coal ports.

Spot cargo prices for Australian Newcastle coal have risen nearly 15 percent from lows in late November after China loosened import restrictions to help meet a winter fuel shortage.

“The reason behind relaxing the restrictions was to ensure coal supplies at utilities, as some coal-fired power plants in eastern regions have been operating with minimum coal inventories,” said Zhang Xiaojin, coal analyst at Everbright Futures.

The move by the National Energy Administration also followed an ambitious gasification programme that moved too many households and factories from coal to gas for its utilities to keep up. Traders said strong orders from India have also supported prices, which hit $105.65 per tonne on Wednesday, the highest since November 2016.

“India is buying throughout Q1, which means the shortage is not expected to end any time soon,” said a coal trader with a major trading house, who declined to be named.


Bottlenecks at import terminals across China and delays at loading ports in Indonesia’s Kalimantan island, one of the world’s bigggest thermal coal mining regions have added to the tighter market.

“The trouble to load in Kalimantan is a result of huge rainfalls. This has triggered replacement orders for supplies from Newcastle (Australia), pushing up prices there,” said a second coal trader, speaking on condition of anonimity as he was not allowed to comment on trading activity.

The congestion started in late 2017, and is getting worse.

Shipping data in Thomson Reuters Eikon shows around 100 large dry-bulk ships waiting to load coal off the coast of Kalimantan, Indonesia, most of them at Samarinda and Taboneo.

Some ships have been waiting since late October, the data shows.

Even more ships are waiting to unload coal in China, where between 400 and 500 large dry-bulk carriers are waiting outside Shanghai/Ningbo and in the Gulf of Zhili, serving the ports of Tianjin, Coafeidian, Qinhuangdao and Bayuquan.

That’s up from around 300 ships waiting outside both Chinese and Australian ports to load or deliver in late 2017.

Analysts expect tight market conditions to last until the Chinese New Year, which starts in February.

“Congestion and supply-side delays have sent prices higher. We see seaborne coal price support for the winter through to the Chinese New Year, especially from China and India,” said Shirley Zhang, principal analyst for Asian coal markets at energy consultancy Wood Mackenzie.

However, in the longer term, prices should ease as China’s import curbs are potentially restored, heading to $69 a tonne by 2021 for Newcastle, Zhang said.

“In general, the Asian demand growth driver is shifting away from China towards India and Southeast Asia, including Vietnam,” she said, where strong demand growth would require investment into coal.

India Coal Demand Growth Slows Amid Power Glut

India’s coal consumption growth has slowed sharply as power plants, the biggest users of the fuel, are using less of their capacity, according to a Greenpeace report.

Coal consumption grew by an average of 2.2 percent over the two fiscal years ended March 2016 and 2017, compared with an average of over 6 percent in the 10 years before that, the report said. Lower consumption at cement and steel factories also contributed to the slowing use of the fuel, the report said.

“It’s too early to say whether this latest trend could mark a turning point in India’s energy mix, or if it’s simply a blip brought about by sluggish economic growth, but there are indications it could be the start of a longer decline,” Greenpeace, an anti-coal campaigner, said in the report.

India’s power plants are using about 60 percent of their capacity as money-losing provincial electricity retailers aren’t able to buy enough power from them. Falling tariffs of solar and wind power are also spurring a rethink on coal projects.

India has said its dependence on coal will continue for decades, but growing concern over air pollution is forcing the government and companies to use the fuel more judiciously.

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.