Indonesia to raise coal export benchmark to US$96

12 June 2018 Week 23 Issue 461

Indonesia’s benchmark coal export price has been set at US$96.6 per tonne for June, US$7 higher than for May and a US$20 per tonne more than one year ago.

The higher June price was possible because of coal production restrictions in China and rising global crude oil prices, Indonesia’s Ministry of Energy and Mineral Resources said.

Although Indonesia’s export thermal coal price touched US$100 per tonne in February, the current benchmark price is still 28% higher than one year ago, analysts Indonesia-Investments said.

However, thermal coal sold inside Indonesia must stay at a maximum US$70 per tonne this year. This is to meet the demands of the government’s domestic market obligation law, which aims to ensure supplies for power plants mainly operated by state-owned PLN.

“PLN is the biggest domestic buyer of coal and due to the soaring coal price in recent years the company’s production costs have been soaring accordingly,” Indonesia-Investments said.

“It cannot pass on these costs to the consumer because a large portion of the electricity supply in Indonesia remains subsidised.”

The US$70 per tonne domestic cap applies to coal with more than 6,000 kcal/kg. Lower heating value coal must sell domestically at between US$37 and US$43 per tonne.

Domestic demand is rising annually as more coal power stations are completed and begin operating. Home demand is forecast by the energy ministry to reach 114 million tonnes this year. Last year it was 97 million tonnes, government data showed.

The government has said it will not increase the price of electricity before the end of 2019. Indonesia-Investments described this as politically motivated because of legislative and presidential elections in 2019.

The Indonesian Mining Association (API) said earlier this year that its members planned to increase overall production to 485 million tonnes, a 5% increase over 2017. It said it expected exports to go up about 7% to 370 million tonnes.

The biggest coal mining firm, Bumi Resources, said it planned to produce up to 96 million tonnes this year, 9% higher than its 2017 production.

Edited by

Richard Lockhart

Editor

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