Indonesia Consumes more Coal due to Power Plant Development

While global coal prices continue to slide, there emerged some support as Indonesia is estimated to consume more coal in 2016 in its coal-fired power plants. According to Indonesia's Ministry of Energy and Mineral Resources, domestic consumption of coal will rise 7.7 percent year-on-year (y/y) to 86 million tons in 2016 from 79.8 million tons in 2015. The ministry set the domestic market obligation (DMO), the minimum amount of coal that Indonesia's coal producers need to supply to the local market, at 86 million tons. The DMO is set to ensure sufficient power generation in Southeast Asia's largest economy.

Indonesia's DMO for coal increases each year due to development of new power stations or expansion of its existing stations. Perusahaan Listrik Negara (PLN), the nation's state-owned electricity distributor, said Indonesia needs a total of 81 million tons of coal for domestic power generation (this figure includes coal demand from independent power producers). Coal accounts for about a third of total power generation in Indonesia and therefore constitutes the second-largest energy source in Indonesia after oil (which accounts for 44 percent).

Tambang Batubara Bukit Asam (Bukit Asam), a state controlled company and one of the largest coal mining companies in Indonesia, is expected to allocate 54 percent of its coal output in 2016 to the domestic market due to growing coal consumption in Indonesia. The miner has signed long-term deals with PLN for the supply of 260 million tons of coal and with Indonesia Power (IP) for 53 million tons.

Indonesian Production, Export, Consumption & Price of Coal:

  2007 2008 2009 2010 2011 2012 2013 2014 2015
Production
(in million tons)		  217  240  254  275  353  412  474  458  376
Export
(in million tons)
  163  191  198  210  287  345  402  382  296
Domestic
(in million tons)		   61   49   56   65   66   67   72   76   80
Price (HBA)
(in USD/ton)		   n.a   n.a  70.7  91.7 118.4  95.5  82.9  72.6  60.1

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

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

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
April   105.61    88.56    74.81    64.48
May   102.12    85.33    73.60    61.08
June    96.65    84.87    73.64    59.59
July    87.56    81.69    72.45    59.16
August    84.65    76.70    70.29    59.14
September    86.21    76.89    69.69    58.21
October    86.04    76.61    67.26    57.39
November    81.44    78.13    65.70    54.43
December    81.75    80.31    69.23    53.51

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

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