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Indonesia Coal Miners Seek Output Cuts as Prices Hit 8-Year Low

Indonesian coal miners say the government should cut this year’s production target by at least 12 percent to boost global prices that have fallen to the lowest in almost eight years.

The world’s largest exporter of power-station coal should reduce output by at least 50 million tons this year and keep exports at a maximum of 300 million tons, Bob Kamandanu, the chairman of the Indonesia Coal Mining Association, said in an interview on Jan. 19. Indonesia plans to produce 425 million tons of coal this year and targets exports of 333 million tons, R. Sukhyar, a director general with the Ministry of Energy and Mineral Resources said Jan. 6.

Thermal coal, used to generate electricity, has tumbled more than half since 2011 amid supply additions and slowing demand in China, the biggest commodities consumer. Coal at Australia’s Newcastle port, an Asian benchmark price, dropped to $58.60 a ton in the week ended Jan. 16, the lowest level since June 2007, according to data from IHS McCloskey.

“If we want to change the situation, volume must definitely be reduced and it’s the government’s job to control it,” Kamandanu said. “If this didn’t happen, it may take two years for prices to improve.”

Indonesia mined 435 million tons of coal last year, more than the government’s target of 420 million, according to the Energy Ministry’s Sukhyar. Output was 474 million tons in 2013.

Indonesian coal supply this year may exceed the government’s plan as companies expand production, partly to repay debts,  Kamandanu said. PT Berau Coal Energy plans to raise output this year to 27 million tons from 24.2 million in 2014, President Director Amir Sambodo said Dec. 22.

Falling oil prices are helping miners cut fuel costs that account for about 40 percent of production costs, according to Kamandanu. Crude futures declined almost 50 percent last year amid a global supply glut.