Indonesia's coal production is projected to increase 4.4 percent to 400 million tons this year, up from the government's initial forecast of 390 million tons. According to Bob Kamandanu, chairman of the Indonesian Coal Mining Association (Asosiasi Pertambangan Batubara Indonesia, APBI), this growth will be spurred by increased demand from Japan, South Korea, Thailand and Taiwan in June. The coal price is expected to increase accordingly in the middle of the year.

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Declining profit in Indonesia's coal industry was also confirmed by Adaro Energy's (ADRO) net profit of 2012. The coal mining company reported net profit of US $385.34 million, a 30 percent fall compared to 2011 when it amounted US $550.35 million. Earnings per share also declined from US $0,01721 in 2011 to US $0,01205 in 2012. Lower sales volume and lower global coal prices were cited as the major factors behind the decline.

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As is widely known, coal is the most important energy source for the generation of electricity in Indonesia. Among the key reasons are that Indonesia has huge reserves of coal under its soils (hence it is relatively cheap to use coal, hence attracting plenty of private investment amid ever-growing electricity consumption in Indonesia over the past two decades) and efficient coal-fired power plant technology.

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Over the past couple of months –essentially since touching a low in August 2020– global coal prices have surged. In January 2021 coal prices were at their strongest levels in almost two years (before experiencing a mild correction in February 2021).

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By revising Indonesian Government Regulation No. 23/2010, the Indonesian government plans to provide local coal miners more certainty by allowing an earlier submission of a request for the extension of mining concessions. Stakeholders in the mining sector argue that this would considerably strengthen the nation’s investment climate, specifically the coal mining industry, on the back of improved legal certainty.

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The big Indonesian coal miners that are listed on the Indonesia Stock Exchange expect to raise their production volumes in 2018 amid rising global demand and the subsequent stronger coal price. Moreover, most local coal companies were heavily affected by bad weather in 2017 and therefore their output had been curtailed naturally, while coal prices had actually been skyrocketing since mid-2016.

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A number of listed coal mining companies on the Indonesia Stock Exchange are eager to raise production capacity amid attractive coal prices. One way to boost production capacity is through the acquisition of other coal miners. Indonesia's key thermal coal price (Harga Batubara Acuan, HBA) - the monthly benchmark price that is set by the Energy and Mineral Resources Ministry - rose slightly to USD $94.80 per metric ton in November 2017.

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Indonesia's November 2016 coal price broke a record. The nation's benchmark thermal coal price (locally known as the Harga Batubara Acuan, HBA) - a monthly price set by Indonesia's Energy and Mineral Resources Ministry and which is based on domestic and international coal indices - jumped 22.9 percent month-on-month (m/m) to USD $84.89 per metric ton this month, the highest monthly HBA price rise ever recorded. Compared to the start of the year, Indonesia's coal price has now risen 59.6 percent, the sixth straight monthly gain. But is this reason for euphoria?

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Many Indonesian coal miners that are listed on the Indonesia Stock Exchange (IDX) have seen their shares surge in the past couple of months supported by the recovering coal prices. Indonesia's thermal coal price (in Indonesian: Harga Batubara Acuan, abbreviated HBA), a monthly price set by Indonesia's Energy and Mineral Resource Ministry and which is based on domestic and global coal prices, soared from USD $50.92 per metric ton in February 2016 to USD $63.93 per ton in September.

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Coal production in Indonesia fell 15.4 percent to 263 million tons in the first eight months of 2015 (from 311 million tons in the same period last year) as Indonesian coal miners cut production due to low global coal demand. Last week it was reported that Indonesia’s reference thermal coal price hit another all-time low at USD $58.21 per metric ton (FOB), down 1.6 percent from the August reference rate, and the fifth consecutive month of decline. Meanwhile, Indonesia’s coal exports fell 18 percent to 211 million tons (y/y) in the January-August period.

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In the 2000s many Indonesian companies diversified their business to include coal mining (or shifting their core business to coal mining altogether) due to lucrative opportunities amid the 2000s commodities boom. However, since 2009 mining companies have had to face tough times. Especially since 2011 commodity prices have shown a declining trend and there remains little hope of a rebound on the short term as the sluggish global economic growth trend persists, particularly led by the economic slowdown in China.

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The government of Indonesia is eager to use current low coal prices as the context to push for consolidation in the country’s coal mining sector. Sudirman Said, Minister of Energy and Mineral Resources, announced that the government may revoke over 4,000 troubled mining licenses this month and install a better licensing system. Licenses that may be revoked are Mining Business Permits (IUPs), not the long-standing Coal Contracts of Work (PKP2B) that are held by companies such as Bumi Resources and Berau Coal Energy.

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