Benchmark Coal Price of Indonesia Near Six-Year High in March 2018
Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA) touched a multi-year high in March 2018. The HBA, which is determined by Indonesia's Energy and Mineral Resources Ministry on a monthly basis (and which is based on several global and domestic indexes), rose 1.2 percent month-on-month (m/m) to USD $101.86 per metric ton in March 2018, its highest position since May 2012.
There are two key reasons that cause momentum for coal prices: (1) stable coal demand in China as well as rising coal demand in India, and (2) limited coal production due to weather conditions.
Although China is eager to curb coal consumption and reduce its dependence on coal as an energy source, coal demand is expected to remain strong in China throughout 2018, hence supporting coal prices as the world's second-largest economy will need more coal imports. Authorities in China announced that they want to cut 150 million tons of coal capacity in 2018. Last year China managed to cut 250 million tons of the country's coal production capacity.
Meanwhile, India is expected to order more coal shipments amid strong demand from the nation's power generation sector, while domestic coal production in India has been lower-than-expected.
Indonesia is one of the world's biggest coal exporters and therefore benefits from good coal demand in China and India. However, the Indonesian government urges domestic miners to keep the nation's coal production below 485 million metric tons in full-year 2018, 25 percent of which is allocated for the domestic market (the so-called "domestic market obligation" or DMO).
However, despite the high HBA, Indonesian coal miners are concerned about the government's intention of setting a low DMO price. State-owned electricity company Perusahaan Listrik Negara (PLN) wants a fixed (low) price for coal that is supplied to PLN under the DMO. Electricity tariffs in Indonesia are set by the government and due to the rising coal price PLN's production costs for electricity have risen accordingly, hence causing a financial burden for the electricity company (coal-fired power plants contribute nearly 60 percent to Indonesia's power generation capacity). A fixed low DMO price would relieve the company from the financial burden.
The exact price formula for the DMO has not been determined yet but it is expected to be announced soon through a Presidential Regulation. Earlier, PLN recommended a price range of USD $55 - $70 per metric ton for the DMO. Local coal miners, however, objected strongly to this cheap range.
Indonesia's benchmark HBA price is based on Platts Kalimantan (5,900 kcal/kg GAR assessment), Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR), Newcastle Export Index (6,322 kcal/kg GAR) and globalCOAL Newcastle (6,000 kcal/kg NAR). Each of these four indexes contribute 25 percent to Indonesia's HBA index.
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↑ | |
| May | 83.81↑ | |
| June | 75.46↓ | |
| July | 78.95↑ | |
| August | 83.97↑ | |
| September | 92.03↑ | |
| October | 93.99↑ | |
| November | 94.84↑ | |
| December | 94.04↓ | |
| Average | 85.9↑ |
| 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 | 2019 | |
| Production (in million ton) |
458 | 461 | 456 | 461 | 485¹ | |
| Export (in million ton) |
382 | 323 | 308 | 364 | 371¹ | |
| Domestic (in million ton) |
76 | 76 | 91 | 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