The country’s coal production took another nose dive at the end of this year’s first semester as the price of the energy commodity showed no sign of rebound amid regulations that business players have deemed to be unhelpful.
Figures from the Energy and Mineral Resources Ministry’s directorate general for mineral and coal showed that coal production was 202.7 million tons during the January to June period of the year, a 17.4 percent drop compared to the 245.5-million-ton level hit in the same period of last year.
“Of the total production until June, as much as 38.6 million tons went to the domestic market,” said Adhi Wibowo, the director for coal at the ministry.
The deliveries to domestic markets during the first semester of the year dropped 7.4 percent from the 41.7 million tons of coal sold to local buyers during the January to June period of last year. On the export side, as much as 164.1 million tons of Indonesian coal was sent abroad, a 17 percent fall compared to the 197.9 million tons sold overseas in the first six months of last year.
Like other coal miners in the world, Indonesian coal mining companies are currently under pressure due to the plunging commodity price. The plunge in price is partly caused by slowing demand following weakening economies in countries that are the main consumers of the commodity. Expectation of the recovery of the coal price has also been dented by the recent plunge in the price of oil, which remains the main energy source in the world.
Indonesia, a major thermal local exporter, set its coal price reference (HBA) for 6,322 kcal/kal coal at US$59.59 per ton for June, already 6.6 percent lower compared to a reference price of $63.84 per ton set in January. Meanwhile, the cal price at the Newcastle port of Australia, which is the world’s benchmark for thermal coal, was at around $61 per ton at the end of June, according figures from Reuters.
The Indonesian government hopes to see national coal production reach 425 million tons by the year’s end. Coal mining businesses remain a significant contributor to the country’s revenue of non-tax income.
However, national coal production would likely hit less than 400 million tons as mining firms are running out of cash and cutting off production, according to the chairman of the Indonesian Coal Mining Association (APBI), Pandu Sjahrir.
“This year, production levels could go far lower by 17 to 25 percent due to the weakening price. Moreover, unfriendly regulations from the government, including the [planned] income tax for coal exports, will also push down mining firms,” Pandu said.
He was referring to the government’s plan to impose a 1.5 percent income tax for coal exports starting August 8.
Meanwhile, the price was in a flat trend as there was no sign of demand recovery from the main coal markets of China and India, according to Pandu.
“There is an increase in demand in India but it cannot overcome the lower demand from China. Meanwhile, Australian coal is getting cheaper because they enjoy a lower exchange rate against the US dollar in addition to less regulations,” he said.