Association Welcomes Coal Production Relaxation Amid Rising Mining Cost Pressures
The Indonesian Mining Association (API/IMA) has welcomed the plan by the Minister of Energy and Mineral Resources, Bahlil Lahadalia, to implement a measured relaxation of coal production. The association believes this policy is necessary amidst the increasing cost pressures faced by mining operators.
API-IMA Executive Director Sari Esayanti stated that the mining industry is currently facing significant challenges. The strengthening of the US Dollar is one of the factors driving up operational costs for mining companies. “This production relaxation policy is becoming increasingly relevant for businesses amidst the current trend of the US Dollar’s appreciation,” Sari said in a statement in Jakarta on Monday.
According to her, while the strengthening dollar provides an advantage for coal exporters because sales transactions are conducted in US Dollars—increasing revenue when converted to Rupiah—the benefits are not fully realised by operators. Key components of mining activities, such as fuel, heavy equipment, and spare parts, still rely on imports, meaning operational costs rise as the dollar strengthens.
“Businesses are also facing the burden of swelling operational costs. Main operational components, such as fuel, heavy equipment, and spare parts, are highly dependent on imports, the prices of which are pushed up by the strong dollar,” Sari explained.
She noted that production relaxation could provide space for companies to compensate for rising field costs. The policy is also seen as capable of maintaining production activities and preserving the mining sector’s contribution to the national economy. Sari revealed that high cost pressures and reduced production quotas have created serious challenges, even forcing some mines to halt production. “The policy of relaxation from the Ministry of ESDM is a breath of fresh air that can guarantee the sustainability of mining operations and is vital to prevent potential layoffs (PHK),” she added.
API-IMA believes that the momentum of commodity price movements, the strengthening US Dollar, and production relaxation can positively impact state revenue. The association supports the government in implementing this policy in a measured manner to maintain industry sustainability while optimising economic benefits for the state.
Minister of Energy and Mineral Resources Bahlil Lahadalia stated that the government is currently formulating a policy to provide certainty for mining businesses. The government is also monitoring global geopolitical developments, including tensions in the Middle East, which affect global commodity price movements. “Today we held a long discussion, almost one and a half hours, on how to create a policy formulation that provides certainty to businesses, particularly in the mining sector,” Bahlil said.
He noted that production relaxation will be applied in a measured way, considering commodity price developments and global market conditions. The government aims to maintain a balance between increasing production and supply stability so that economic benefits can be felt by businesses, the state, and the public. “On that basis, we will always follow developments and implement measured relaxation. This means if prices are good, we will increase production. If prices plateau, we will implement policies to ensure supply and demand are maintained,” Bighal said.
The Minister of ESDM ensured there would be no changes to regulations for mining companies currently in operation. The government will continue to use existing regulations while fulfilling the mandate of the Mineral and Coal Law (UU Minerba) regarding priorities for MSMEs and sectors supporting downstreaming programmes.