Indonesian Coal Mining Market and Coal Producer

Indonesia is going to play a major role in the coal markets, particularly thermal, in the short to medium term. As other major producers such as Australia, Colombia, Russia, South Africa and the US battle infrastructure constraints, Indonesia is widely seen as one producer that can expand production to meet increasing demand.

Indonesia has been the one producer over the last 5 years that has been able to consistently expand production. It is also the largest contributor to the growth of global thermal seaborne trade. Indonesia produced over 300Mt of coal in 2010, an annual increase of 15%. The increase in coal production in 2010 continues the trend of expansion the Indonesian coal industry has achieved since 2000. Between 2000 and 2010, Indonesia’s coal industry increased its output by 12% per annum from 76Mt in 2000.

Bituminous and sub-bituminous coals account for the majority of Indonesia’s coal production, totalling 120Mt and 137Mt respectively for 2010. Production of low rank coal has grown signifi cantly over the last 5 years. Low rank coal production totalled almost 45Mt in 2010. Metallurgical coal production totalled 5Mt in 2010 with the majority being mined in the Murawai coking coal Basin on the northern Barito River, Central Kalimantan. We expect low rank and sub-bituminous coals will accounts for the majority of Indonesia’s coal production and exports in the future as bituminous coals become more scarce.

In 2010, Indonesia exported 260Mt. The fi ve largest export destinations for Indonesian coal were China, South Korea, India, Japan, and Taiwan. China is now the largest export market for Indonesian coal closely followed by India. The strong growth in these export markets has been due to their rapidly increasing energy requirements,gypsum powder production line.

Potentially the biggest change in Indonesia for investing in the mining industry is the legal environment. The Indonesian Government passed the Mining Law on 12 January 2009 in an effort to provide regulatory certainty and to encourage new investment in the mining sector. This has been successful over the last 3 years but there are sections of the mining law that are starting to slow investment such as the Indonesian reference coal price (HBA). The new coal pricing regulation is causing some investors, such as Indian and Chinese power generators, to re-evaluate the operating parameters,granite stone crushing machine.

End users, particularly in the energy sector are changing the way they buy and use thermal coal. This is similar in some ways to what we have seen in the metallurgical coal markets where blending and changing technologies are changing the coals used. The thermal coal markets in India and China are importing and utilising increasing volumes of lower ranked coals. Korea, Thailand, and Philippines are also looking to alternative lower grade coals and Indonesia is in a position to capitalise on these emerging markets。

The vast majority of Indonesian coal producers, including the six largest producers, are listed on the Bursa Efek Indonesia (BEI). We do not cover any companies listed on the BEI however there are a number of juniors listed on the ASX. Our pick of these are Altura Mining (AJM), Cokal (CKA) and Realm Resources (RRP).
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