Production & Export Down, Coal Consumption in Indonesia Up
Domestic consumption of coal in Indonesia rose 14.8 percent (y/y) to 87.43 million tons in 2015 according to the Ministry of Energy and Mineral Resources. This figure is considerably higher than the government's target of 70 million tons. Adhi Wibowo, Director for Coal at the Energy Ministry, said this increase is caused by higher electricity demand in domestic industries in the second half of 2015. Meanwhile, Indonesia's coal production reached 392 million tons in full-year 2015, below the government target at 425 million tons.
Coal production in Indonesia fell 14.4 percent (y/y) to 392 million tons in 2015 from 458 million tons in the preceding year. Production declined due to weak global demand and the subsequent persistent weakness of global coal prices amid sluggish global economic growth (particularly China's economic slowdown). Last year, the Indonesian Coal Mining Association (APBI) said the free cash flow of many Indonesian coal miners has turned negative. A negative free cash flow is only a positive matter if it is caused by large investments that will bring returns on the long-term. However, in the case of the Indonesian coal miners, the negative free cash flow is caused by weak coal prices.
Indonesia's benchmark thermal coal reference price (in Indonesian: Harga Batubara Acuan, or HBA), a monthly rate set by the Energy Ministry, fell 0.58 percent (m/m) to a new record low of USD $53.20 per metric ton (FOB) in January 2016 from USD $53.51 in December 2015. However, the month-on-month decline is smaller than declines recorded in the preceding months. But whether this is a sign that the fall is stagnating and coal prices will soon rebound is uncertain. Demand from Indonesia's main export markets is not expected to improve significantly in the short-term. Domestic coal demand, on the other hand, may grow in the year ahead due to accelerating economic growth, growing industrial output, and new coal-fired power plants that are coming online. The economy of Indonesia is expected to expand 5.3 percent (y/y) in 2016, up from an estimated 4.7 percent in 2015.
Read Column: Analysis and Overview of Indonesia's Coal Mining Industry
Meanwhile, exports of Indonesian coal in 2015 fell 22.9 percent (y/y) to 294.5 million tons from 382 million tons in the preceding year.
Indonesian Production, Export, Consumption & Price of Coal:
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Production (in million tons) |
217 | 240 | 254 | 275 | 353 | 412 | 474 | 458 | 392 |
| Export (in million tons) |
163 | 191 | 198 | 210 | 287 | 345 | 402 | 382 | 295 |
| Domestic (in million tons) |
61 | 49 | 56 | 65 | 66 | 67 | 72 | 76 | 87 |
| Price (HBA) (in USD/ton) |
n.a | n.a | 70.7 | 91.7 | 118.4 | 95.5 | 82.9 | 72.6 | 60.1 |
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 |
| January | 109.29 | 87.55 | 81.90 | 63.84 | 53.20 |
| February | 111.58 | 88.35 | 80.44 | 62.92 | |
| March | 112.87 | 90.09 | 77.01 | 67.76 | |
| April | 105.61 | 88.56 | 74.81 | 64.48 | |
| May | 102.12 | 85.33 | 73.60 | 61.08 | |
| June | 96.65 | 84.87 | 73.64 | 59.59 | |
| 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