Coal-miners initiate benchmark

Coal-miners initiate benchmark

Leony Aurora, The Jakarta Post, Jakarta

Coal mining companies in Indonesia are developing an output-
specific price index that will be used as a reference in domestic
and international trade.

Indonesian Coal Mining Association chairman Jeffrey Mulyono
said the Indonesian Coal Index (ICI) would reflect the average of
transactions concluded with local and global consumers over a
certain period of time, possibly a week.

"With such a reference, hopefully our coal prices will be more
stable," Jeffrey said on the sidelines of a coal seminar on
Wednesday.

"We hope to realize the index by the end of the year," he
added.

At present, Indonesia's coal price is included in the Barlow
Jonker Index (BJI), which monitors coal from Australia and Asian
countries.

Jeffrey said Indonesia's coal had lower caloric value compared
to other countries but lower sulfur and ash content, desirable
qualities for power plants.

The BJI concentrated mainly on caloric value, an area where
Indonesia had a disadvantage, he said.

"The ICI will portray the advantages of the (low) sulfur and
ash, although this also means low caloric value."

Indonesia is the world's second-largest exporter of thermal
coal, which is used in power plants, and the fifth-largest
exporter of ordinary coal, which is a lower grade used by steel
plants.

High coal prices, prompted by rising global demand as oil
prices break new records, have encouraged Indonesia to increase
production of the resource.

Some 70 percent of the 131 million tons of coal produced last
year was exported to Japan, Taiwan, South Korea, India and China.

The ICI, said Jeffrey, would be similar to the Indonesian
Crude Price, which factors in different kinds of oil produced
locally and serves as a reference price.

"The government can also use the index to estimate cost, for
example, in cement or textile production," Jeffrey said.

The association has estimated that total coal exports of
various types will continue to increase to 193 million tons by
the year 2010; from about 91 million tons in 2004 and about 104
million tons this year.

The demand for Indonesian coal from China alone is projected
to increase by 18 percent over the next five years, while demand
from India is expected to surge 16 percent for the same period.

The coal price, which has fluctuated around US$28 a ton during
the period 1999 to 2003, surged to average of $44 per ton in 2004
after major coal producer China stopped exporting to meet its
growing domestic needs.