JAKARTA: Indonesia will fail to achieve its coal production target of 425 million tons in 2015 as the country’s coal miners have cut production by an estimated 20 percent. Domestic coal mining firms have cut coal output due to persistent low coal prices resulting in a negative free cash flow for many miners. Global coal prices have declined due to a supply glut and weaker global demand amid sluggish economic growth.
Bambang Gatot, Director General for Coal and Minerals at Indonesia’s Ministry of Energy and Mineral Resources, said coal production in Indonesia will remain in decline as long as coal prices continue to fall. Indonesia’s November benchmark thermal coal reference price (set by the government) fell 5.2 percent (m/m) to USD $54.43 per metric ton (FOB) from USD $57,39 per metric ton in the preceding month hence touching a new all-time record low since the start of this reference price in January 2009. So far this year, the reference price has fallen 15.0 percent.
Adhi Wibowo, Director of Business Development of Coal at the Energy Ministry, said reduced coal production has no impact on domestic consumption of coal in Indonesia. Several years ago, Indonesia implemented the domestic market obligation (DMO) for coal in a bid to ensure that local buyers have access to Indonesian coal. Each year, the government sets a new DMO for coal. This year the DMO was set at 62 million tons, slightly down from last year’s 63 million tons. Wibowo said the government allows coal miners to cut production rates as long as they comply with DMO allocation regulations.
Indonesia’s coal export performance, on the other hand, is heavily affected by global conditions. Indonesian coal exports have plunged 32.4 percent to 215 million tons in the first ten months of 2015, compared to 318 million tons in the same period last year.
