Indonesia's Coal Price Fell in December, Strong Rebound in FY-2017

Although the December 2017 HBA at USD $94.04 per metric ton is lower than its position in the preceding month and considerably lower than the USD $101.69 in the same month one year earlier, Indonesia's benchmark coal price still managed to post a strong rebound in full-year 2017. The average HBA for full-year 2017 is USD $85.9 per metric ton, up 39 percent from the average of USD $61.9 in the preceding year.

Although improving economic growth and the development of coal-fired power plants in the Asian region boosts coal demand (hence giving support to the coal price), it is China (the world's largest coal consumer) that basically controls the coal price. If China wants the coal price to rise it simply decides to import more coal, but if the price is considered high enough, then it decides to produce and sell more domestically-sourced coal. The reason behind these strategies is that Chinese authorities became concerned about the high non-performing loan (NPL) ratio in the country's banking system. Bad loans in the mining sector are one of the major causes of China's high NPL ratio. Hence, by boosting the coal price, Chinese coal miners have more room to meet their obligations toward Chinese banks.

The HBA (for thermal coal) forms the basis for determining prices of 77 Indonesian coal products and calculating the royalties that coal producers need to pay for each metric ton of coal they have sold. The HBA is the average of four domestic and international coal prices, namely the Indonesia Coal Index (ICI), Newcastle Export Index (NEX), Globalcoal Newcastle Index (GCNC), and Platt’s 5900.

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

Month	2012	2013	2014	2015	2016	2017
January	109.29	87.55	81.90	63.84	53.20	86.23
February	111.58	88.35	80.44	62.92	50.92	83.32
March	112.87	90.09	77.01	67.76	51.62	81.90
April	105.61	88.56	74.81	64.48	52.32	82.51
May	102.12	85.33	73.60	61.08	51.20	83.81
June	96.65	84.87	73.64	59.59	51.87	75.46
July	87.56	81.69	72.45	59.16	53.00	78.95
August	84.65	76.70	70.29	59.14	58.37	83.97
September	86.21	76.89	69.69	58.21	63.93	92.03
October	86.04	76.61	67.26	57.39	69.07	93.99
November	81.44	78.13	65.70	54.43	84.89	94.84
December	81.75	80.31	69.23	53.51	101.69	94.04
Average	95.5	82.9	72.6	60.1	61.8	85.9

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

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