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Coal Exports Drop on Low Prices

The nation’s coal exports significantly dropped in the first nine months of the year as coal companies continued to suffer from low prices in addition to becoming increasingly dependent on the domestic market.

Figures from the Energy and Mineral Resources Ministry’s directorate general for minerals and coal showed that national production reached 308 million tons from January to September this year, declining by around 14 percent compared to the 360 million tons produced in the same period of last year. 

“Out of total production, 235 million tons were exported,” director for coal, Adhi Wibowo, said. 

The export figure was equal to an almost 20 percent drop compared with the 293 million tons sold overseas during the January to September period of last year. As many as 6 million tons of coal are currently in inventories, a similar level at the end of September last year, according to Adhi.

In a contrary trend, as much as 67 million tons were sold to domestic markets during the first nine months of the year, increasing by around 9 percent compared to the 61 million tons delivered to domestic buyers in the same period last year.

Coal mining firms have been struggling to survive amid a challenging business environment marked by low commodity prices partly caused by weakening demand against the backdrop of global economic uncertainties. 

The government set the Indonesian coal reference price (HBA) at US$57.39 per ton in October, an all-time low since the reference was first introduced in 2009. The HBA price is currently 10 percent lower compared to the $63.84 per ton set for January.

The price at Australian port Newcastle, the benchmark for thermal coal, dropped to $54.37 per ton in April, the lowest level since May 2007, Bloomberg reported. Prices continued sliding over the last the three months, the longest run of declining prices since April 2014, Bloomberg added. 

World Coal Association’s chief executive, Benjamin Sporton, said in a recent interview that the global demand for energy was expected to continue growing, particularly in new coal-fired power plants between now and 2040.

“The market is growing, the future for coal is strong and we’ll see prices rebound. Over the next few months, I’m not sure, it is very difficult to forecast but in the next couple of years we will see prices rebound,” Sporton said.

While Chinese demand for coal would likely taper off, Indian demand could become a key driver of coal prices thanks to the country’s efforts to boost electricity capacity. 

“In China, the coal share in the energy mix will decrease because there is more utilization of gas, renewable energy, nuclear, and others. In India, there will be very significant demand for coal due to plans to increase electricity capacity. Indonesia is increasingly using coal for its domestic market instead of exporting it,” Sporton said.

The government of Indonesia plans to see national coal production hit 425 million tons by the year’s end. The coal mining business remains a significant contributor to the country’s revenue of non-tax income. However, given the pressure on prices, output is expected to be well below 400 million tons this year. 

The government has been encouraging miners to sell more of their coal to the domestic market, which is expected to expand following the government’s electricity procurement program. While non-fossil energy sources are expected to be part of the electricity procurement program, the share of coal-fired power plant development remains dominant.