RI coal production to increase to 119.7 million tons

Fitri Wulandari, The Jakarta Post, Jakarta

Coal production is expected to increase significantly this year on the back of high demand from both the global and domestic markets, the national coal association announced on Monday.

Jeffrey Mulyono, chairman of the Indonesian Coal Mining Association (APBI) said according to Business Monitor International, coal production in 2004 was estimated at around 119.7 million tons, up from 109.3 tons in 2003 and 103 million tons in 2002.

"We are optimistic that demand for Indonesia's coal has good prospects because of growing energy demand from industrial countries such as China and the domestic market," Jeffrey said.

He said global demand for coal was still driven mainly by energy-hungry China. Currently, 84 percent of that country's electricity is generated by coal-fired power plants, and will increase in proportion with the Chinese government's goals to provide electricity for 700 million people.

Increased demand, Jeffrey said, was also expected from other Asian countries such as Taiwan, South Korea, Japan and India.

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

Domestic demand for coal has been increasing gradually, and the market consumes 25 to 35 percent of total production, said Jeffrey.

"Many industries are now shifting to coal as a fuel source, for example textile factories," he said.

The construction of small and large coal-fired power plants also boosts domestic demand, he added.

Coal-fired Tanjung Jati B power plant, which is under construction, requires 4.5 million tons of coal annually to produce 1,300 Megawatts of power.

Jeffrey said the higher production volume would be met by existing coal producers that planned to increase production. For instance, second-largest coal producer PT Kaltim Prima Coal plans to raise production up to 24 million tons from an average 18 million tons per year.

Additional production would also come from several new coal mining companies, including PT Garda Tujuh Buana, PT Kalimantan Energi Lestari, PT Marunda Graha Mineral and PT Mandiri Perkasa.

Top coal producers for this year are PT Adaro (22 million tons), Kaltim Prima Coal (18 million tons), Arutmin (14.5 million tons), Kideco (12 million tons), state-run coal mining PT Tambang Batubara Bukit Asam (11 million tons) and Berau Coal (8 million tons).

Aside from rising demand, coal producers also expected an improvement in price.

Jeffrey said the price of coal averaged US$38.89 per ton for high-quality coal, a jump from $24 in the second quarter of 2003.

He said the price would stabilize to around $30 per ton.

"The acceptable range for producers and buyers is between $30 and $32 per ton."

He added that the APBI expected to maintain the price at an acceptable rate to give producers space to improve their existing capacities.

Despite the bright outlook, Jeffrey said problems related to fiscal policies and legal issues still persisted, hindering new exploration.

Among the problems are value added tax, illegal coal mining and Law No. 41/1999, which outlaws mining in protected forests.