Bumi to increase coal output by 14%

Rendi A. Witular, The Jakarta Post, Jakarta

Publicly listed PT Bumi Resources, the country's largest coal producer, said over the weekend that it had set a target of increased coal output at around 14 percent this year, taking advantage of a rise in global coal prices.

Bumi finance director Eddie J. Soebari told The Jakarta Post that the company was planning to produce around 44.6 million tons, up from 39 million tons last year.

He said that about 26.6 million tons of the company's total coal production this year would be derived from its newly acquired subsidiary PT Kaltim Prima Coal (KPC), and the remaining 18 million tons from its other unit PT Arutmin Indonesia.

"The increase in our production is aimed at meeting demand from several countries who previously relied on China, and also to take advantage of the increase in global coal prices, which we expect to soar by 20 percent this year," said Eddie.

Bumi has estimated that coal prices this year could reach an average of around US$35 to $38 per ton for high quality coal.

Indonesian coal producers will benefit by the decision from China, the world's largest producer and consumer of coal, which has decided to limit its coal exports this year due to a serious coal shortage at home.

China needs coal for 70 percent of its power plants, expected to consume at least 900 million tons of coal this year.

Due to the shrinking coal supply from China, several countries such as Japan, South Korea, Taiwan and India have been seriously hurt, not only in terms of supply but also in the increasing price of coal due to the limited supply.

Eddie said that Bumi was expecting to plug the shortage of coal in South Korea this year and in several eastern European countries.

Bumi becomes the country's largest coal producer after it acquired KPC shares from Anglo-Australian mining firm Rio Tinto and Anglo-American energy giant BP for $500 million last year. Rio Tinto and BP each own a 50 percent stake in KPC.

KPC operates a huge coal mining site in Sangatta, Kutai Timur regency, in East Kalimantan. Some 96 percent of the company's high quality coal is exported to international markets, generating around $450 million in revenue each year.

According to the Indonesian Coal Mining Association (APBI), citing the Business Monitor International, coal production from Indonesia in 2004 is estimated at around 119.7 million tons, up from 109.3 tons in 2003 and 103 million tons in 2002.

Seventy percent of Indonesia's coal production goes toward export.