JAKARTA: Coal shipments from Indonesia will plunge as much as 17 percent next year, with most miners in the world’s No.1 exporter of thermal coal losing money and slashing output, a senior industry official said on Friday.
Indonesia will export less than 300 million tonnes in 2016 from 330-360 million tonnes this year, the chairman of the country’s top coal industry association told Reuters.
Reduced shipments from the Southeast Asian nation could help bolster international prices hit by oversupply and slowing Chinese demand. Benchmark thermal coal has dropped around 16 percent in 2015 to stand near nine-year lows at $51.84 a tonne.
“About 60-70 percent of domestic producers are underwater -meaning that their cash flow is not enough to sustain their business,” said Pandu Sjahrir from the Indonesian Coal Mining Association. He added that domestic coal demand would be 90-110 million tonnes in 2016 compared to 90 million this year.
Indonesian miners are now either halting production or doing “selective mining” of easier to access coal, said Sjahrir, who estimates benchmark prices will average $60 a tonne in 2016.
A mining ministry official last week said Indonesia’s exports of coal fell 20 percent from January to September this year. To help its coal miners, whose sector and related industries employ about 1 million people, Indonesia’s government has abandoned plans to ramp up coal royalties, Sjahrir said.
The country’s finance minister had earlier said that plans to increase government revenues from the mining sector would be shelved if prices stayed low. Top coal producers in the Southeast Asian nation include Adaro Energy, Berau Coal, Bukit Asam , Kideco Jaya Agung and Bumi Resources.
To combat slowing Chinese and Indian demand for Indonesian coal, which accounts for roughly half of the country’s total exports, miners are increasingly investing in domestic power projects, Sjahrir said. The government has set an ambitious goal of building 35 gigawatts of new power stations by 2019.
But with the majority of these new power plants likely to be coal-powered, there are doubts the country can meet its new commitment on cutting greenhouse gas emissions growth by 29 percent by 2030.
The Indonesian government will have to increase power tariffs for consumers or offer subsidies to attract investment in modern and low-emission power plants to meet both its energy and greenhouse gas emissions targets, Sjahrir said.
