Tue, 25 May 2010

Reva Sasistiya & Bloomberg

The country’s coal output may reach 320 million tons this year, up from 300 million tons in 2009, as producers look to take advantage of higher prices, the Indonesian Coal Producers Association said on Monday.

“Coal demand remains bullish this year, mainly from China and India,” said Bob Kamandanu, chairman of the association, known as APBI.

Increased production has mainly been driven by higher coal prices - currently around $104-105 a ton, compared to a $70 a ton average price last year.

However, favorable weather conditions have also played a part with El Nino bringing drier than normal weather, which is more suitable for mining.

APBI said Indonesia produced 59 million tons of coal in January and February, without giving a comparison for the same period last year. It said production may exceed its 320 million ton estimate.

“Actually, the output may reach 380 million tons, but still we have to consider bad weather that may occur in December,” Kamandanu said.

Local demand for coal should be around 60 million tons this year with the remainder destined for export, he said.

Indonesia is the world’s largest exporter of thermal coal, used in power stations, and electricity-hungry China is its biggest market.

Chinese demand for thermal coal will be strong this year due to low rainfall cutting hydroelectric power production and poor transportation links between Chinese coal-producing areas in the northwest and the major power stations in the southeast, said ANZ Bank in a research note on Monday.

Exports from Vietnam are expected to drop, which will result in the Chinese importing more coal from Indonesia and Australia, the note said.

Indonesia’s major coal producers are all forecast to produce more coal this year, APBI said.

PT Adaro Energy and PT Kaltim Prima Coal should each produce an extra four million tons, PT Berau Coal an extra three million tons and PT Arutmin Indonesia an extra two million tons, the association said

Meanwhile, the government is predicting coal output of 250 million tons this year. The reason for the discrepancy with the APBI estimate is that government figures do not include production from small-scale and illegal coal miners.

According to government figures, Indonesia produced 254 million tons in 2009.

“We won’t include the output from small concessions as there is no guarantee of their output,” said Bambang Gatot Ariyono, director of coal and minerals at the Energy Ministry.