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Miners still jittery over China’s next coal policy
While getting back on their feet following an upward trend in coal prices recently, miners in Indonesia, the world’s top thermal coal exporter, are still in a wait-and-see mode over China’s future import policy
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hile getting back on their feet following an upward trend in coal prices recently, miners in Indonesia, the world’s top thermal coal exporter, are still in a wait-and-see mode over China’s future import policy.
The price of Asia’s benchmark Australian thermal coal heated up to US$65.9 per ton on average throughout last year, from $57.5 per ton in 2015.
The price even hit a monthly average of $100 last November before stabilizing to $86.6 last December.
The surging coal prices followed the move taken by China, the world’s biggest producer as well as consumer of the commodity, to cut its output to push up prices and fulfill its hunger from imports instead.
Consequently, China’s imports soared 25.2 percent on annual basis to 255.5 million tons last year.
President director of PT Adaro Energy, Indonesia’s second largest coal producer, Garibaldi “Boy” Thohir maintained a positive outlook of the coal industry this year despite the difficulty to predict prices, largely determined by China’s future hunger to import.
“The coal industry is expected to be better in 2017 as there is mounting optimism over the [demand] growth from Indonesia and from its Southeast Asian neighbors, which will be in dire need of coal to support their electricity procurement plans and help them reach stronger economic growth,” Boy told The Jakarta Post on Friday.
Due to the uncertain price outlook, Adaro would not hastily expand production, but instead keep an annual coal production target of 52 million to 54 million tons this year, the same level of last year.
The company prefers to preserve its coal reserves to develop its power plant business in the long run, in line with the government’s goal to procure 35,000 megawatts (MW) of electricity across the country by 2019.
Coal-fired power plants are expected to contribute to 56.97 percent of the total capacity.
Unlike Adaro, state-owned coal miner Bukit Asam already has a firm goal to increase its coal production by 20 percent to 30 million tons this year, but the output will be oriented toward its own use as it plans to develop 5,000 MW power plants in the near future.
Nevertheless, Bukit Asam president director Arviyan Arifin said the company was also waiting for China’s anticipated new policy to limit coal’s volatility in the future.
“At the moment, it’s really hard for us to forecast the volatility because there are too many factors involved, including sentiments from China and India. Hopefully, there will be a new equilibrium soon within the industry,” he said.
Meanwhile, Indonesia’s biggest coal miner Bumi Resources aims to keep riding on the crest of a coal wave as long as possible. Its sales volume will be raised by 6.8 percent to 94 million tons this year from last year as the coal price is expected to soar by 30 percent on an annual basis.
“What is there to be worried about? Around 60 percent of our quantity in 2017 has already been committed to. The figure will rise further to 75 percent with finalization of annual contracts with Japan for the period of April 2017 to March 2018,” Bumi Resources director and corporate secretary Dileep Srivastava said.
He added that China’s move to curb volatility, which helped boost prices, sent an “encouraging signal” for the industry.
Late last year, BMI Research, a unit of Fitch Group, predicted that Indonesia’s coal production would climb by an average 7.5 percent each year from 2017 to 2020 after a 15 percent decline on an annual basis throughout 2016.
Adaro Energy’s stock price stood at Rp 1,720 (13 US cents) apiece as of Friday, relatively stable compared to Rp 1,740 apiece on Jan. 3, the first trading day of the Indonesia Stock Exchange (IDX) in 2017.
Meanwhile, Bukit Asam’s stock price fell 8.2 percent since the New Year to Rp 11,725 apiece and Bumi Resources’ stock price jump 54.4 percent in the same period to Rp 420 apiece as of Friday.
