The 7th Coal Buyers & Producers meeting 2019 – Notes.

December 28, 2019 Ian Wollff Coal Asia publications 0

The 7^th Coal Buyers & Producers meeting 2019 – Notes.

On the 6-7^th November petromindo.com & Coal Asia held the “7^th Coal Buyers and Producers meeting for 2019” in Jakarta. Nearly 200 attended, with about 15% being women. The event was held mostly in English, with translations services available.

Personal Overview.

Industry & government are optimistic that coal prices will rise, but fundamentals of coal over supply & increased efficiencies that lower costs, would suggest coal prices may decline. The elephant in the room is the Government. The tin and nickel industry experience would suggest that the Government will step in to reduce exports. This may be designed to lift coal prices wherein Indonesia gets more benefit per ton for its diminishing natural resources, and pays political service to the long-term strategy of conserving cheap energy resources for future Indonesians. China has shown how it can manage /manipulate a largely market driven industry to achieve a similar national strategy.

The event was organized by Petromindo.com & Coal Asia magazine. Thanks to the many sponsors who supported this annual event that presents the workings of the Indonesian coal industry to the public. The Gold sponsors are; PT. Prolindo Cipta Nusantara, Pertamina Lubricants and Aruba, a Hewlett Packard Enterprise company.

Presentations may be downloaded with link: http://bit.ly/2019CoalBuyers

Conference Notes.

DAY 1.

Hendra Sinadia, Executive Director of the Indonesian Coal Mining Association welcomed the speakers and audience. Hendra mentioned a long list of global and local topics that are keen to be discussed in relation to the Indonesian coal industry. It is hoped the new Indonesian government will provide strong support for a pro-industry approach to the coal sector.

Sri Raharjo, acting Director general for Coal read out the Ministers speech. The Indonesian national energy plan continues to rely upon coal till at least 2050. Continuation of previous plan, with emphases of new mine mouth power plants, and rationalized shipping distances for coal supply. The ESDM is to grow its on-line system to further include monitoring of coal shipping, and near real time production monitoring.

Discussion; –

The ESDM is continuing to look at options regarding the policy for expiring PKP2B coal companies. These options include the choice to manage through revised Law (4/2009) or through regulation.
The ESDM realizes that implementing the hilirizasi (smelting) program is more difficult than initially thought, particularly as more interaction with local communities on employment and other matters arise.
Increasing the bio fuel from B20 to B30 needs support from the coordinating minister.
There is ongoing consideration of investors needs, including discussion with major miners, and input called for from selected professional associations etc.

Wafit, Director of Mineral & Coal Development Program at ESDM, spoke on “Outlook of Indonesian Coal Exports and DMO Policy to coal supply domestic market”. Spoke to a series of well-prepared slides. The ESDM recognized coal resources are 151.39 billion ton, and Reserves 39.89 billion ton. Assuming 500 mill tpy production, this will last 78 years, which is considered enough. Tables show Indonesia’s annual coal production, and Domestic consumption. The DMO projected consumption will grow for power plants from 2020 (109 mill ton) to 2024 (137 mill ton). The Cement / fertilizer domestic DMO coal consumption is expected to grow from 29.45 mill ton in 2020 to 33.63 mill ton in 2024. Other sectors need for coal will be relatively stagnant. The 2018 proportion of coal sourced from PKP2b (489.15 mill ton) and from IUP /Provinces (105.79 mill ton). The proposed draft on DMO is to continue with the % of coal production commitment to DMO, to continue with a coal cap and penalties for non compliance, but to add in a reward for those companies exceeding their DMO quota’s. The ESDM market outlook is that volumes will gradually decline, but Indonesia should remain as the largest seaborn supplier of coal.

Discussion: –

There is consider to modify the DMO structure to recognize 4 categories of coal users, and the types of coal required.
Setting the DMO criteria of % production and price cap is expected to be undertaken on 31 December, or later. It was noted that most coal companies are required to have their 2020 production plans submitted, negotiated and approved before the 31^st

Nyoman Oka, Head of Committee Marketing APBI-ICMA spoke on “Overview of Thermal Coal in Domestic and the future of coal in Indonesia”. The Indonesian Coal Mining Association (ICMA) has 159 members which includes 90 coal producers and 68 providers of coal mining services, and contributes >80% of Indonesia’s coal production. Their biggest members represent over USD 10 billion in market capitalization and employ more than 100,000 people. Coal is expected to continue to grow as the major energy source in Indonesia till 2027. Coal production is expected to peak in 2019 with 600 million ton, but decline to around 530 by 2027. Various tables show predicted tonnages (and grades) for export & DMO needs from 2014 to present, and projected to 2027. The overall coal price is expected to rise slightly in 2020 – 2021. Government policy issues of concern relate to the CCoW extension to IUPK for many of the big miners, and the Ministry of Trade regulation 80/2018 relating to shipping & insurance is to take effect 1^st June 2020.

Discussion: –

Concern the ESDM has never been on target for estimating DMO requirements. The estimation method could be revised, and perhaps include a quarterly / monthly adjustment component.

Ayung Prabowo of Pertamina Lubricants spoke on “Challenges and opportunities for Pertamina lubricants to support the coal industry”. A general introduction to Pertamina’s oil products.

Discussion: –

The proposed change from B20 to B30, or rumoured B50 in 2020 will require greater emphases on fuel filter management.

Jimmy Deng, General manager of Indonesia branch of China Coal Solutions (Singapore) spoke on “Chinese Coal Imports and its Policies”. China has a policy to curb imports of coal, as it has sufficient domestic consumption, and has diversified its power sources. China continues to buy imported coal as it is typically cheaper than domestic coal, but China’s trade surplus is shrinking, and that may restrict imported tonnages. China has several customs mechanisms to curb coal imports. China’s domestic coal production has recently (28 Sep 2019) been boosted by the completion of a long (1,800km) & fast (36 hr) freight rail with a 200-mill ton capacity. China’s controlling of coal imports is part of its strategy to keep domestic coal prices within a given range, such that coal producers and users can benefit while providing cheap energy to drive the economy. China Coal Solutions consider the imported coal is very important component, and will continue to buy Indonesian coal.

Discussion: –

China typically imports about 60% of its thermal coal from Indonesia, and 30% from Australia.
China’s energy mix will likely see coal power remain stable, while there will be some growth in other sectors.
The remainder of 2019, and 2020 China coal imports likely to follow last years pattern, but the temporary restrictions on some ports can be imposed at any time.

Dicky Sarean, System Engineer at Aruba, spoke on “Digital mining: Wireless solutions for mine site”. This Hewlett Packard Enterprise company has a number of WIFI units suited for the mining industry.

Krishna K. Venkata, Principal at Oliver Wyman spoke on “Overview of ASEAN coal fired power plant”. There are several factors influencing ASEAN power markets, with positive trends including rising income & urbanization levels needing more power to negative trends of challenges to find finance to invest in coal power. The pro-environment purchasing patterns are slowly taking on popularity in ASEAN, though coal remains relevant in the medium term. Coal prices are set to remain low as there is a structural oversupply of coal. It is suggested coal players form partnerships to create value beyond production (such as power stations).

Discussion: –

It seems every 2 weeks there is one large firm withdrawing support for coal power. China remains the prominent financier for coal power projects.
India’s salt / Thorium reactor is still in the experimental stage.

PANNEL DISCUSSION, on Indonesia coal trading trends with Jusnan Ruslan (Dir PT. Indotambangraya Megah Tbk), Ramli Ahmad (Dir Madison Energy PL), Kurnia Ditasari (Noble Group), Krishna K. Venkata (Principal at Oliver Wyman).

China and India are the main market buyers / drivers of price.
India is slow to develop its own coal resources, so Indonesian exports to India will continue.
Emerging markets of Vietnam, Bangladesh, Pakistan, Myanmar and Philippines will see increased sellers’ competition into these markets over the next 5 years.
Over supply with 2019 production estimated to be 600 – 620 million ton from Indonesia, putting downward pressure on coal prices.
Pressure on coal sellers and traders every month with placing best price spot sales. Recommend for coal sellers / traders each to focus on 1-3 markets, and find/develop a market advantage.
South Asia market contains a seaborn freight element. Vietnam has logistic supply difficulties.
There is some price dumping by large producers who need to maintain throughput rather than full stockpiles. Big coal suppliers can cross subsidize some sales, and also give more advantage terms of payment. But big coal suppliers less able to provide sales kick-backs.
Most coal still sold on FOB, as suppliers avoid CFN risks.
Many coal producers now looking to broaden their services to capture some additional downstream value – such as managing buyers coal stockpiles etc.
What is the new normal for Indonesian coal supply – 600 mill ton with less controls on IUP’s or 400 mill following national planning targets?
The Indonesian exchange rate often comes into play, as coal sales in US Dollars. This may help Indonesian coal compete with new Russian supply to the Pacific.
The trend is for little long-term contracts, and mostly spot markets. Buyers & Sellers each want the opportunity to improve margins when price fluctuates in their direction.
Investors are worried by the changing regulations, wherein perhaps a new mining law can support a more stable mining / trading platform. Investors attracted to Australia with more predictable law.
There are some (minor) concerns over the Mine Mouth Power purchase program, regarding the compulsory cross share ownership requirements.
There is some thought that IUP’s may come further under the Central Government control on the excuse of securing the nations energy resources. The smaller IUP’s come under local government with apparently cheaper overheads. There are 1170 IUP’s in the Operation stage, wherein closer scrutiny of performance is likely to be undertaken by the KPK.
The ESDM has rejected requests for some mines to operate on a “pass-through” price structure to Indian power plants.
Regulatory risk remains significant in Indonesia.

PANNEL ON COAL FOR CEMENT & SMELTER

Ery S. Indrawan, Senior advisor Indonesia Cement Association spoke on “Overview of coal demand in cement industry”. There are 14 cement companies in Indonesia, with 500 cement plants to supply capacity of around 110.9 million ton that sells some 71 million ton domestically, and exports 7 million ton, leaving a significant over capacity component. The major cost component (35%) is the supply of coal. Several detail tables of supply & demand shown. In 2019 some 61.9 million ton of Clinker to be produced using 15.4 million ton of coal with GCV (GAR) 4,200-4,500, TM 25.35%, Ash 3.6%, TS <1%. By 2024 the coal supply is estimated to be 16.3 million ton.

Budi Santoso, Business Development Director of the Indonesian Olefin, Aromatic & Plastic Industry Association (INAPLAS) spoke on “Update Indonesia Petrochemical Development 2019-2024” Bukit Asam is undertaking a feasibility Study on coal to plastic. It is hoped the FS will be positive, and construction can be completed in 2024 costing around US$ 2.5 billion. The plant would consume 6.2 million tpa coal being 5.2 feed stock, 1.0 for power plant. Similar plastics / fertilizers are being manufactured in Indonesia (3 mill tpy) by using natural gas feed stock, with a further 3 mill tpa importation of plastics. The proposed coal to plastic plant could offset such plastic imports.

Robert Machnik, RAFAKO S.A representative, spoke on a number of personal experiences with the Indonesian coal industry (no presentation). Experience associated with the EPC contracting for the Lombok coal power plant reflected the need for coal power in Indonesia. The Government changed the emissions standards on the 23 April 2019 that had repercussions through the power plant industry. Existing power plants were not required to update, but those in construction or had been signed up were to adjust. This was an expensive exercise, and it was not clear who would bear the cost and be responsible for corresponding delays for completion. The technical modifications were made more difficult as Indonesian power plants are typically cooled with sea water, wherein the new emission standards are harder to achieve. The implementation was complicated further by the various government procedures for contract adjustments.

Panel Discussion: –

Indonesia would like to export more cement, but main ASEAN exporter is Thailand that exports around 30 million tpy.
It is suggested that emissions and waste be linked more closely with the saleable by-product of gypsum.
Almost all Indonesia cement is Portland type – as this requires less clinker, and is thus cheaper. To get special strength cement (certain foundations etc) then it is easier (cheaper) to import than wait for Indonesian cement factories to make a special product run.
The price of oil should be above US$ 60/barrel to allow coal conversion to plastics (Nafta) to begin to be viable. The risk is that oil price will fluctuate, and not be sustained above US$ 60/ barrel for the time it takes to pay back construction capital etc.
Coal gasification is not new technology, and historically only been undertaken when there is no access to oil (Germany during war, SA ) Many studies have yet to find a cost competitive technology.
Poland is last coal producer / consumer in Europe, and has supportive banks etc.
Would like to see incentives of 200% tax deduction for coal research.

Dendi Ramdani, Office of chief economic group Bank Mandiri, spoke on “Coal Market Outlook and the Role of Banking in the Coal Industry”. Global slow down and Bloomberg suggests coal price to slightly (from $60 to perhaps $75/ton) increase over the next 2-3 years. Actual price will depend on China as market price driver, and India will remain a major buyer of Indonesian coal. China policy is to maintain domestic coal price within a band of 61 – 81 US $ / ton (Newcastle Coal). Indonesian domestic coal consumption will go up from 115 mill ton to 153 mill ton once the new project of 35 GW power plants are running. Nice table showing 16 listed (IDX) coal companies provide 56% of Indonesia’s coal. Capital expenditure of Indonesian mining companies was up from Rp. 9.2 trillion in 2017 to Rp. 18.6 trillion in 2018. Outstanding loans to the coal sector significantly increased in 2019, and its quality is also improving. However, the overall performance of coal mining companies is worsening in 2019. Banks considering finance to the coal industry look at IRR, Cash Flow, Price Outlook, Efficiency, Production & Business sustainability. The bottom line is – can the coal mine survive at the worst scenario / lowest coal price.

Discussion: –

The trend is for banks to become more fiscally accountable, wherein funds for all industries (including the coal industry) become tighter.
Many mining companies are seen to be at their peak, with less upside.
There are several Indonesian banks that will loan to the coal industry, with Mandiri being one of the bigger banks.

Arthur Simatupang, Chairman of APLSI (Indonesia Independent Power Producer Association) spoke on “PLTU and Mine Mouth Power Plants”. Indonesians consume relatively little electric power compared to other Asian countries. The national energy is at the 3^rd program of development, but this may need to change when electric cars become popular etc. The national energy mix still relies upon coal for the next 15 – 20 years, and they are cheapest source of power. The national plan is to steadily increase the DMO but this is based on old production cap targets of 400 mill ton. Challenges ahead is that significant investment is required to build the planned power plants, with estimates of US$ 30-40 billion from debt financing and US$ 10-20 billion from equity financing. The current IPP regime is unattractive for the private sector. There has been a recent lack of supportive regulations for the IPP scheme, wherein industry wants better regulatory framework, bankable PPA’s, strong financial backing, and experiences EPC contractors. Several IPP’s are in construction progress.

Discussion: –

The recent Java wide power black out indicates the power network is stressed. This is of concern to IPP producers who can only sell power to PLN. This event led to calls to overhaul PLN’s monopoly practices, but it is a sensitive topic.
Could be better coordination between ministries, and industries, to make use of fly ash.
The new emissions standards (SOX, PM, trace elements etc) are stimulating discussion on who will pay for the additional infrastructure cost, and compensate for increased operational costs. Note that a regulation change no longer is considered as grounds for Force Majeure.
Mine Mouth Power companies’ discussion limitations on coal price.

Harlen, Head of Coal Unit PLN spoke on “PLN’s strategy to meet power plants coal demand”. PLN’s coal demand in 2019 is targeted to be 97 million ton, and will gradually rise to 137 mill ton in 2024, when some old power plants may be decommissioned bringing coal demand to 126 million in 2026 and then rising to 153 million ton in 2028. PLN strategy of coal supply includes improving the coal delivery system. There seems to be no change to power plant development based on regional access to coal and power needs.

Discussion: –

Tenders for new coal needs will reflect that some new needs are mine mouth power.
Some long-term coal supply contracts (3-4 years) with annual price adjustments, and typically +/- 20% variance in tonnage.
Some small ships can-not unload at various coal ports in heavy seas.
Load factors at some IPP is 85%, that is not an easy target as it can be as low as 72% due to lack of power needs.
Some power plants have reached their design life (typically 30 years), For example Suralaya is now 33 years old. Decisions to keep them running or close down will be made based on needs, rather than on changes in efficiency. Some old diesel power plants have been stopped, and old gas turbines have been replaced by new coal plants.

DAY 2.

Achmad Reza Widjaja, Vice President Investor Relations PT. Bumi Resources as moderator for Day 2 with various presenters & panels to view Indonesia’s next year’s outlook on coal marketing.

Hannan Nugroho, Bappenas Senior Planner spoke on “Government policy on Coal (including its exports) in the next 5 years”. Outlined past coal policies and brief look at past production, and noted actual production differed from government set targets for DMO etc. Mentioned in the next 3 months the Government needs to develop a new medium-term plan, this will depend on policy directives from the President. The political pull is between A) the national energy policy of conserving coal for long term domestic use, verses B) export coal to help short term balance of payments & support domestic growth.

Discussion: –

Suggestion that production from small mines may decrease.
Bappenas is a government agency that is to follow many sectors, one of which is the National Energy Policy – Follow even if reality is not the same as policy.
Bappenas role is to monitor the implementation of ESDM programs, and to see if they comply with current policy. Bappenas do not undertake independent studies, such as global coal trends, unless requested to by the President. Bappenas discusses topics with ESDM, and asks tough questions, particularly on a “what if”

Scott Dendy, Director – Energy Market Insights and Price Discovery, HIS Markit spoke on “Indonesian Coal Prices – the growth of M42 and near term outlook”. Coal trade Benchmarks typically reflect longer term transparent and fair contracts. HIS Markit has a long history of monitoring Indonesian coal trades and price reporting. HIS McCloskey produce a number of Indonesian coal grade price tracking, and compares to similar global trades. Since the coal price recovery of August 2017, coal prices have been very volatile, and more sales are conducted on spot bases. HIS complies with stringent compliancy requirements to ensure their coal indexes are independent and reliable. Numerous slides giving numbers that underly trading indexes, price ratios for hedging etc. The mean forward price for Indonesian medium – low CV coals is likely to remain at similar present prices or increase slightly till 2023, though volatility will continue. Export volumes will likely stabilize, with China key price setter. Pacific seaborn coal to peak around 2029.

Discussion: –

The Indonesian HBA that sets price structure for royalty is a mix of indices, including the Australian Newcastle index that is biased for high thermal coal into Japan. Some Indonesian coals now have their own indices. The overall lower price of the Indonesian indices may be a disincentive for the ESDM to use, as it implies a lower royalty basis.
Many new power plants are to use gas, and this may be a long-term trend towards lower growth in coal demand.

Geoffrey Tucker, Exploration, Mining Development Indonesia (EMD) representative spoke on “Coal Exploration in Indonesia – How can the exploration investment climate be strengthened in the current price trend”. The EMD is preparing a second white paper as input towards further Government Policy. General statistics demonstrating mining’s significant contribution to the economy & employment. Greenfield exploration is decreasing, indicating that Indonesian mining industry shall decline and eventually end. Exploration investment is dependent upon Indonesia’s attractive geological potential, and unattractive regulation of the exploration / mining industry. Indonesia can strengthen investment in exploration by improving the new tenement bidding process, ease of environmental permitting, and improving the risk capital aspects (divestment criteria) or supporting various forms of capital raising / contributing farm in’s etc. Overall lowering of up-front capital risk is important.

Discussion: –

The ESDM could further stimulate exploration by making geological data more available.
Indonesian investors have little interest in the exploration sector, particularly for large long-term projects. There are ongoing discussions to open the IDX to junior explorers.

Tariq Khalil, Managing Director of PT. Mosaic Risk Analytics”, spoke on “Tracking coal project investment risk with AI”. Use global data to reduce the guesswork out of coal project investment. Used an example of predicting Upper Barito River barging availability for a coal project. Looked at aspect of changing land use patterns (deforestation) and changes in rain fall patterns along with changes in community patterns to customize a stress test. Typically use available long-term satellite image data, river records and assumptions for run off etc to develop scenarios.

Discussion: –

This practical work helped a coal company to convey more confidence in the project.

Martin Dydian, of International XCMG spoke on their “heavy equipment supplies to Indonesia”. They are one of the largest mining equipment manafacturers in China, and now have a JV with Titan Barana Niaga to provide support services in Indonesia. They offer mining machinery, spare parts, financial investment, leasing, E commerce and training. Their mining equipment typically use key components from USA, Japan etc.

Discussion: –

They have manufacturing plants in many countries, including Malaya, but not Indonesia.

PANNEL DISCUSSION – COAL OUTLOOK I

Nattasya, Marketing manager of Golden Energy Mines (GEMS) spoke on “Coal Production Outlook”. Started out with broad overview of the Indonesian mining sector. Cost efficiency has been undertaken through fuel & logistic efficiency plus digitization platforms, wherein GEM can survive the in the present low price era.

Pulung Peranginangin, CEO/ President of PT. Ucoal Sumberdaya – Uresources Group gave a very engaging talk on their “South Sumatra coal Mines”. (no presentation). This is a very small IUP operation with 2 mine sites in South Sumatra. This is a story of struggle and determination to survive.

The southern site has stopped operations due to the high cost of land acquisition, and ongoing ban on coal trucks using the public highway. Their northern mine (in S. Sumatra) has produced only 88,000 ton of coal (CV 4,400- 4,600) against a 2019 plan of 500,000 ton with a SR of between 3-4:1. The key constraint is the S. Sumatra’s ban on using coal trucks on public roads. Sometimes the road can be open for 3 alternative routes. Typically, a 200 km trip involves many “portals” with an overall fee of perhaps Rp250,000 / 10 ton truck. The southern mine has options to use the Servo dedicated coal road, or PT. KA rail, but both options are too expensive. The option to use the PT. KA rail involves a down payment of Rp.120 -200 billion just to secure allocation.

Discussion: –

Small, medium and large coal companies all compete for exports and domestic sales. There seems to be no supply discipline in Indonesia.
There is still growing demand for 4,200 coal grades, particularly within Indonesia. Price volatility is here to stay.
General agreement of unsatisfactory DMO supply policy.
Some concern that some buyers from China (and others) agree to buy a cargo, but just before loading, then pull out of sale, causing miner to stress over sunk costs to get the coal to stockpile & arrange barging etc.
Meeting annual work plan & budget is not always within control of the miner, but miner can be punished for not meeting plan. [Only 53% of mines on target for RKAB].
The Governments zonation of coal supply & delivery not used by private industry – wherein Kalimantan coal is sold into Lampung. Now PLN looking at buying some low CV coal for the W.Aceh power plant (Sibolga) that has main coal deliveries from E.Kal.
Concern that Indonesian rules are applied on a case by case bases. – difficult to predict business environment.
Industry & government expect coal prices to rise, but fundamentals of coal over supply & increased efficiencies that lower costs would suggest coal prices may decline.
Hope for ESDM to undertake better planning in 2020.

PANNEL DISCUSSION – COAL OUTLOOK II

Hary Kristiono, Chief Operating Officer of PT. Medco Energi Mining International (MEMI) spoke on “If Indonesia Coal still dominate Seaborne Coal market”. Noted 7 issues related to Indonesian regulations, including DMO (tonnage & price), vessel & insurance requirements, moratorium on exploration, CCOW extension and ESDM on line platforms. Mentioned 4 constraints on Indonesian exports – DMO, Infrastructure, costs and trend to lower quality. Provided informative slides on their various coal operations. Their mines are in North Kalimantan, and are significant contributors to that province’s economy & jobs. Some high TS coal (3.6%) is sold into specialized markets, including domestic cement.

Abid Ubaidillah, Commercial Director of PT. Bukit Asam Tbk (PTBA), and spoke on” Bukit Asam coal”. PTBA sells some (3-4 million ton/ year) of high CV coal, and much of its better coal is sold out, as PTBA has about 50% of its production in long term contracts. PTBA sells some coal to China but is concerned about demurrage issues. PTBA is diversified, including 2 X 60 MW mine mouth power plants. PTBA has some 3.3 billion ton of reserves, but much of this is low CV. PTBA is researching coal conversion technologies to add value to its low CV coals.

Agustinus Thamrin, Director of PT. Manambang Muara Enim (MME), and spoke on “MME coal Mine”. The MME mine has 140 million ton coal reserve 4,700 Kcal/kg ARB. There are 3 options to transport the coal to the eastern port options of South Sumatra. Issues remain with today being the 1 year anniversary of the S.Sumatra governors ban of coal trucks on public roads (ostensibly overcrowding). The Servo road & train options are expensive. One option is to an upstream river port, that is shared by 10 parties, so very limited loading options. The shallow river has caused a number of barges to be grounded, wherein the local fishermen held the tug boat operators responsible for disturbing their fishing, and demanded exorbitant compensation to release them. The local police have been engaged to help resolve this issue. There are no plans for the government to dredge the river. During the dry season the heavy smoke prevents barges from traveling on the river.

Andi A. Manggabarani, Marketing Director of PT. Prolindo Cipta Nusantara (PCN), spoke on “the PCN coal mine experience”. The two mines are located in S.Kalimantan, producing 5 million tpa of low TS & low ash coal. The banks supported the start-up, and early production increases were readily undertaken. But more recently there are difficulties with market over supply, spot contracts, low water levels obstructing coal logistics, lower price, DMO requirements. The latest issue is the ESDM new on line coal reporting system is only open Monday – Friday from 9-5, wherein this is very inconvenient – particularly for spot trades. South Kalimantan coal mines have a proximity advantage in being close to many Java based markets, wherein they can sometimes make a profit from Transfer Quota sales.

Discussion: –

Some miners would like to use an Indonesian index, rather than the HBA that includes the Newcastle Index.
Indonesian coal producers are aware the Government is looking to extract more from miners (hunting in the zoo). The miners emphasize they are business men, and they will continue until profit margins do not match risk, then they will pull out.
The royalty is based upon FOB vessel, but some coal miners sell FOB truck / barge, wherein the royalty does not reflect their actual selling price.
The coal gasification industry is not commercially attractive, as there is too much risk associated with gas / coal price, particularly as the pay back for the $ billion-dollar conversion plant. Waiting to see who goes first to the tender phase, and how offtake will be managed / priced.
Some IPP producers are concerned that PLN transmission is not optimal, leading to lower and sometimes irregular power offtake – leaving the IPP underutilized.
Briquetting is not considered viable in Indonesia (2,000 GAR coals).
Some research to convert low CV coals into metallurgical coals.