Indonesia’s Coal Sector Eyes 2012 Boom

By webadmin on 09:49 pm Sep 12, 2011
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Ririn Radiawati Kusuma

Coal production is set to surge next year as coal miners bolster their businesses and several new mines commence production, the nation’s miners say.

Indonesia’s production of thermal and coking coal is forecast to hit 380 million tons in 2012, up 5.5 percent on this year’s estimate, Supriatna Suhala, the executive director of the Indonesian Coal Mining Association (APBI), said on Monday.

The Energy Ministry’s forecast for coal production next year is 332 million tons, but that estimate does not include the output of smaller mining companies.

China’s demand for coal is expected to double in the next five years to 6 billion tons, according to the APBI. Meanwhile, coal is used in Indonesia’s power plants to make up for insufficient supplies of natural gas, which is locally produced in large amounts but most of which is exported.

Indonesia exports the majority of its coal to China, India and Japan.

Meanwhile, domestic consumption is regulated under domestic market obligations. The Energy Ministry said that next year 63 coal producers were obliged to supply as much as 82 million tons for domestic consumption, a 4 percent increase from this year’s requirement.

The coal is allocated to state-owned electricity company Perusahaan Listrik Negara, which uses as much as 57 million tons — 70 percent of the total demand.

The remaining coal will be allocated to cement factories, gold and copper producers Newmont Nusa Tenggara, Freeport Indonesia and Antam and nickel producer Inco.

Supriatna said global energy demand was prompting many coal miners to ramp up production and pushing non-energy companies to expand into coal mining. He said more countries, such as Kenya, Bangladesh and Pakistan, were seeking to import coal from Indonesia.

“Industries see it as an interesting time to invest in the coal mining sector,” Supriatna said.

The APBI forecast that coal prices would be steady next year. The Energy Ministry said that as of August, Indonesia’s coal reference price was $117 per ton, up 4.5 percent from January.

About 62 percent of Indonesia’s coal production is categorized as middle-calorie, which is used to fuel power plants at home and abroad. More than 13 percent is high-calorie coal, almost all of which is exported to Japan because of its stringent requirements for carbon emissions. It is used there for power generation and steelmaking.

In 2010, Indonesian production declined because of wetter-than-normal conditions.

The government plans to ban shipments of raw coal material by 2014, instead requiring the sector to add value to the product before it can be exported.

The largest player in the Indonesian coal industry is industrial giant Bumi Resources, followed by Adaro and Kideco Jaya Agung, a unit of Indika.

The sector’s activities are focused on the resource-rich island of Kalimantan.