Coal Remains King in Indonesia: Rising Domestic Consumption of Coal

However, data regarding domestic coal consumption in Indonesia in the first four months of 2016 are not 100 percent accurate yet as coal production data from mining business license-holders (Indonesian: Izin Usaha Pertambangan, or IUP) still need to be verified. According to Energy Ministry official Sujatmiko, coal production of Coal Contracts of Work-holders (abbreviated PKP2B) stood at 86.63 million tons in the first four months of 2016, down from 96.77 million tons in the same period one year earlier. This decline is due to miners' decision to cut back on coal production amid the globe's low coal prices. Although Indonesia's reference thermal coal price of Indonesia (Harga Batubara Acuan, or HBA), set by Indonesia's Energy and Mineral Resources Ministry, rose 1.3 percent (m/m) in June 2016 it remains at multi-year lows just above the USD $50 per metric ton (FOB) level. Low prices are the result of weak global demand in combination to the coal supply glut. China, together with India the biggest buyers of Indonesian coal, pledged to cut down on dirty fuel consumption in an effort to combat toxic air pollution. Therefore the outlook for coal remains bleak.

Indonesia's rising domestic coal consumption and falling coal exports are in line with the targets set in the National Medium‐Term Development Plan (RPJMN) 2015-2019. This plan wants to see coal production at 400 million tons (per year) by 2019, 60 percent of which is to be absorbed domestically. Bambang Gatot, Director General for Coal and Minerals at the Energy Ministry, said additional demand from new coal-fired power plants in the country are expected to push Indonesia's coal demand to 100 metric tons in 2016. As such, Indonesia's weakening coal exports are offset by strengthening domestic consumption.

These developments in Indonesia basically go against the global current, and much at the alarm of environmental activists: while many countries move away from dirty fossil fuels, Indonesia is increasing coal consumption for its energy supply needs. Part of the government's ambitious energy program (which entails the adding of 35,000 MW of power to the national grid in the next four years) is the construction of 117 new coal-fired power plants throughout the archipelago (creating 10,000 MW in additional power-generation capacity).

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	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
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}

Further Reading:

• Overview of Indonesia's Coal Industry

‹ Back to News Columns

Discuss

Please sign in or subscribe to comment on this column

Misja Alexander | 14 June 2016 08:59

Indonesia has extensive geothermal, solar, micro-hydro & biomass potential... when will they become serious about developing renewable resources?