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Latest Reports Coal Consumption
Domestic coal demand in Indonesia is estimated - by the Indonesian government - to reach 114.51 million tons in 2018, up around 6 percent from estimated demand in 2017. Bambang Gatot, Director General for Coal and Minerals at the Energy and Mineral Resources Ministry, said coal-fired power plants remain the biggest domestic consumers of coal.
The International Energy Agency (IEA) says worldwide demand for coal will not grow significantly over the next five years. It sees worldwide coal demand in 2021 roughly at the same level as in 2014. In a report published on Monday (12/12) the agency says it detects rising demand for renewable energy sources (at the expense of coal) in Europe and North America, while in China coal consumption is also expected to stagnate. However, the IEA believes that coal will remain the most important energy source as it is cheap and easy to produce.
Indonesia's thermal coal price (in Indonesian: Harga Batubara Acuan, or HBA), a monthly price set by Indonesia's Energy and Mineral Resources Ministry and which is based on domestic and global coal prices, surged further in October 2016. The HBA soared 8.04 percent month-on-month (m/m) to USD $69.07 per metric ton from USD $63.93 per ton in the preceding month. Indonesia's HBA price is now at its highest level since August 2014. This rally is mainly supported by rising coal demand in China.
Coal prices are experiencing a remarkable rebound so far this year. On Thursday (15/09) the coal price touched USD $70.95 per metric ton (September delivery, ICE Futures Exchange), up about 53 percent from its position at the year-start. For Indonesia, a country that ranks among the world’s biggest coal producers and exporters, this is good news. There are plenty of coal companies active in Indonesia that will see improving corporate earnings due to the bullish price. Moreover, several coal mining companies that are listed on the Indonesia Stock Exchange (IDX) have also seen their shares surge significantly.
The DBS Group Research expects that the coal price will remain in the range of USD $60 - $65 per metric ton in the second half of 2016. Given that coal demand from China remains bleak (as authorities are eager to meet environmental accords) chances are slim that the coal price can manage to go higher. For Indonesia, a country that - in terms of commodity exports - is highly dependent on coal and crude palm oil, it means challenges remain despite the recently sharply rebounding coal prices.
There will not be a rebound in the coal industry anytime soon. Indonesia, one of the world's leading (thermal) coal producers and exporters, says the nation's coal output will continue to decline in 2016 and 2017. This continued decline in production is caused by the decision of smaller miners to cease production amid the globe's low coal prices that touched a decade-low earlier this year. There should occur a positive side-effect, however, if miners indeed cut their output and that is upward support for coal prices.
The Indonesian Coal Mining Association (APBI) expects the coal price to remain stable around USD $50 per ton in the remainder of 2016. Indonesia's benchmark thermal coal price (harga batubara acuan, abbreviated HBA), which is set (on a monthly basis) by the Energy and Mineral Resources Ministry, rose 1.4 percent (m/m) to USD $52.32 per ton in April 2016. Since February the HBA has been climbing in three consecutive months. The last time Indonesia's benchmark coal price recorded a three-month gaining streak was in the October-December 2013 period.
Trouble for Indonesian coal miners will not end soon as India - one of the world's leading coal consumers - is eager to boost domestic production of coal thus reducing the need for coal imports. This has given additional downward pressure on global coal prices. Over the past 11 months Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA), a monthly reference price set by the Ministry of Energy and Mineral Resources, has been on a streak of continuously falling prices. The February 2016 rate was set at USD $50.92 per ton, a far cry from USD $111.58 per ton in February 2012.
The coal price will have serious difficulty to rise as long as crude oil prices remain low and China's economy remains in slowdown-mode. Weak global oil prices (expected to remain below USD $40 per barrel this month) - and the strong US dollar amid looming US monetary tightening - give a bad signal to other commodities, including coal, while the world's largest energy consumer China is struggling to combat its economic slowdown implying limited global coal demand.
The global coal industry is still plagued by pessimistic sentiment. Not only has the global supply glut in combination with sluggish global economic growth put serious pressure on coal prices (while China introduced stricter coal quality tests on thermal coal imports), but most countries are also placing more emphasize on cleaner energy sources, which further curtail demand for coal. Coal prices are currently heading for a decade-low with January 2016 coal futures now at USD $52.55 per metric ton on the ICE Futures Exchange.
Latest Columns Coal Consumption
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?
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.
Domestic coal consumption in Indonesia rose 34.5 percent (y/y) to 24.5 million tons in the January-April 2016 period, according to data from Indonesia's Energy and Mineral Resources Ministry. This growth is caused by higher domestic coal demand due to Indonesia's ambitious 35,000 MW program (many of the power plants constructed in this program are coal-fired). Meanwhile, Indonesia's coal exports were down 14 percent (y/y) to 68 million metric tons over the same period amid sluggish global demand.
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.
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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