Coal Mining Update: Production, Export & Domestic Consumption

Although coal demand from other domestic industries is rising, it remains small compared to demand that stems from power plants. In full-year 2018 local power plants are estimated to consume 89.75 million tons of coal, or 78 percent of total estimated domestic coal consumption in Indonesia. The cement industry comes on second place with an estimated demand of 15.6 million tons in 2018, followed by the paper industry with demand estimated at 3.18 million tons.

Hendra Sinadia, Deputy Executive Director of the Indonesian Coal Mining Association (APBI), said the government's 2018 domestic coal consumption estimate is too optimistic as he detects not too significant growth, partly due to obstacles (for example land acquisition troubles) in electricity projects.

Supangkat Iwan Santoso, Director of Procurement at state-owned utilities firm Perusahaan Listrik Negara (PLN), said total coal consumption of power plants in Indonesia reached 76 million tons in 2017, up from 70 million tons in the preceding year. Contrary to Sinadia, he expects to see significant growth in domestic coal consumption this year as electricity demand is rising in Indonesia. Meanwhile, existing power plants continue to raise output capacity and therefore require more coal.

Although the Indonesian government is eager to curtail coal production in order to safeguard enough supplies for future generations (while also encouraging more domestic consumption of coal rather than simply exporting coal to other nations), Bambang Gatot said the government would allow a five percent year-on-year increase in coal production in 2018 (from production realization in the preceding year). Coal miners are encouraged to produce more coal as the coal price has been rising rapidly since the second half of 2016.

Moreover, many new coal mining companies are now set to start operations. There are now about 2,000 mining permit holders (in Indonesian: Izin Usaha Pertambangan, IUP) that have completed their feasibility studies - or construction at their facilities - and are ready to commence production. As production is estimated to rise in 2018, exports should rise accordingly, driven by Asia-Pacific demand.

Indonesian Production, Export, Consumption & Price of Coal:

	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Production (in mln tons)	240	254	275	353	412	474	458	461	456	477¹
Export (in mln tons)	191	198	210	287	345	402	382	323	308	369¹
Domestic (in mln tons)	49	56	65	66	67	72	76	76	91	108¹
Price (HBA) (in USD/ton)	n.a	70.7	91.7	118.4	95.5	82.9	72.6	60.1	61.8	85.9

^{¹ government target
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	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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