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Indonesian coal exports continue to slide

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World Coal,

Indonesian coal exports could fall below 300 million t in 2016, Reuters has reported, citing the an official from the Indonesian Coal Mining Association, who said that between 60 and 70% of Indonesian producers were currently cash-flow negative.

As a result, Indonesian coal companies were either halting production or engaging in “selective mining” of easier-to-access deposits, Pandu Sjahrir told Reuters, with reports suggesting that the country’s coal output was down 14% for the first nine months of 2015 to 308 million. Exports were down 20% to 235 million t over the same period.

Recent analysis from commodities research firm CRU suggested the Indonesian coal exports were also being hit by fall off in demand for its lower-quality sub-bituminous coal in places like China and India, which are opting for higher-quality coals from producers like Australia.

A number of regulatory changes in Indonesia over the past 12 months have also adversely effected the coal industry, including new requirements for letters of credit for exports and for conducting business in rupiah, rather than US dollars, as well as changes to mining taxes and forestry access charges.

Growing domestic demand for coal – which the Indonesian Coal Mining Association expects to be between 90 and 110 million t next year, up from 90 million t this year – will help to offset some of the fall in exports with miners now investing in coal-fired power projects to help boost demand.

The Indonesian government has set a target of building 35 GW of new power plants by 2019, the majority of which are likely to be coal fired.

And for the wider coal industry, lower Indonesian exports are a boon. According to Fabio Gabrielli of Mercuria Energy Trading, speaking at the recent Coaltrans World Coal Leaders Network in Barcelona, the fall in Indonesian exports will offset the continuing fall in Chinese imports, helping to balance the Asian seaborne market next year.

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