Through the Energy and Mineral Resources Ministry the Indonesian government targets a total coal production figure of 485 million tons in full-year 2018. Key reason why the government wants to limit coal production is to safeguard enough supplies for future use, especially for domestic use (in coal-fired power plants).

However, Bambang Gatot, Director General for Coal and Minerals at the Energy Ministry, said he would not be surprised to see actual coal production exceeding the quota this year, particularly as there are many Mining Business License (IUP)-holders on Kalimantan and Sumatra who are eager to generate profit after experiencing tough times in recent years. Moreover, it is not rare at all for coal miners to not follow the government's coal production quota.

Meanwhile, the government's 2018 coal production quota is actually much higher than the target that was set in Indonesia's National Medium Term Development Plan (RPJMN) 2015-2019. In the RPJMN 2015-2019 the government targets coal production at 406 million tons in 2018, followed by 400 million tons in 2019. The rapidly recovering coal price, however, made it basically impossible for authorities to push coal production down to those levels.

Moreover, the government is not too strict in curbing companies' coal output. Currently, the only strategy it uses to limit coal output is by disapproving mining companies' annual Work Plan and Budget (in Indonesian: Rencana Kerja dan Anggaran Biaya, or RKAB). Still, Gatot said that - if the government would not intervene at all - then Indonesia's total coal production would probably touch 600 million tons per year.

Meanwhile, those domestic coal miners that supply at least 25 percent of their output to the domestic market - under the domestic market obligation (DMO) program (at a fixed uncompetitive price of USD $70 per ton) - are allowed to exceed the production target (set in their RKAB) by 10 percent.

Hendra Sinadia, Executive Director of the Indonesian Coal Mining Association (APBI), said coal production in Indonesia has actually declined in the first quarter of 2018 amid bad weather conditions and declining demand from China. However, he still expects coal production to touch a high figure in the remainder of the year on the back of the higher (and stable) coal price.

Read also: Overview of Indonesia's Coal Mining Sector

According to data from Indonesia's Energy and Mineral Resources Ministry, a total of 145 million tons of coal was produced in the January-May 2018 period. Exports reached 105 million tons, while 40 million tons were supplied to the domestic market.

Indonesia's benchmark thermal coal price (in Indonesian: Harga Batubara Acuan, or HBA) managed to rebound in June 2018 after falling in the two preceding months. The HBA, a monthly price that is determined by Indonesia's Energy and Mineral Resources Ministry (and which is based on several global and domestic indexes), was set at USD $96.61 per ton in June 2018, up from USD $89.53 in the preceding month.

Indonesian Government's Benchmark Thermal Coal Price (HBA):

Month  2017  2018
January  86.23  95.54
February  83.32 100.69
March  81.90 101.86
April  82.51  94.75
May  83.81  89.53
June  75.46  96.61
July  78.95
August  83.97
September  92.03
October  93.99
November  94.84
December  94.04
Average  85.9  96.5

 

Month  2012  2013  2014  2015
 2016
January 109.29  87.55  81.90  63.84  53.20
February 111.58  88.35  80.44  62.92  50.92
March 112.87  90.09  77.01  67.76  51.62
April 105.61  88.56  74.81  64.48  52.32
May 102.12  85.33  73.60  61.08  51.20
June  96.65  84.87  73.64  59.59  51.87
July  87.56  81.69  72.45  59.16  53.00
August  84.65  76.70  70.29  59.14  58.37
September  86.21  76.89  69.69  58.21  63.93
October  86.04  76.61  67.26  57.39  69.07
November  81.44  78.13  65.70  54.43  84.89
December  81.75  80.31  69.23  53.51 101.69
Average  95.5  82.9  72.6  60.1  61.8

in USD/ton
Source: Ministry of Energy and Mineral Resources

Indonesian Production, Export, Consumption & Price of Coal:

  2014 2015 2016 2017 2018
Production
(in million ton)
 458  461  456  461  485¹
Export
(in million ton)
 382  375  366  364  371¹
Domestic
(in million ton)
  76   86   90   97  121¹
Price (HBA)
(in USD/ton)
 72.6  60.1  61.8  85.9     -

 

  2008 2009 2010 2011 2012 2013
Production
(in million ton)
 240  254  275  353  412  474
Export
(in million ton)
 191  198  210  287  345  402
Domestic
(in million ton)
  49   56   65   66   67   72
Price (HBA)
(in USD/ton)
  n.a  70.7  91.7 118.4  95.5  82.9

¹ government target
Sources: Indonesian Coal Mining Association (APBI) & Ministry of Energy and Mineral Resources

Bahas