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Indonesia’s Coal Price Hit an All Time Low in May

Indonesia’s coal reference price fell in May to an all-time low due to oversupply in the market, the Energy and Mineral Resources Ministry announced.

May’s coal price dropped to $61.08 per metric ton, 5.2 percent lower than April’s price of $64.48 per ton. The price declined 17 percent compared to May last year which was set at $73.60.

The May price is the lowest since the government set the price in 2009 to provide a transparent benchmark for calculating royalties. The coal reference price is derived from the average of four general coal price indexes used in the coal trade: Indonesia Coal Index, Platts Index, New Castle Export Index and New Castle Global Coal Index.

Hendra Sinadia, deputy executive director at Indonesia Coal Mining Association, or APBI, said the decline is caused by the oversupply of coals in the market and low demands from China. “The price is affected by oversupply and the low crude price. The demands from China is still relatively low,” he said. Hendra said the declining price trend pushed the coal industry to increase efficiency in their business.

“The middle and big companies can still survive even though the margin is declining. What we can do to boost the commodity price is by decreasing the coal productions,” he said.

The government planned to revise a 2012 regulation on non-tax revenue to increase coal royalties. For low calorie coal, the government planned to increase the royalty to 7 percent from the current 3 percent, 9 percent from 5 percent for medium calories and 13.5 percent from 7 percent for high calories coals.

Separately, Bambang Gatot Ariyono, director general of mineral and coal at the Ministry, said the government is formulating new strategy to face the low price of coal. “We need to have a meeting first to [assess the situation],” he said.

The government set a 425 million tons target for coal production this year. Some 110 million tons of the figure is allocated for domestic market and the rest for export.
Source: GlobeAsia