Coal news and updates

Coal Mining News Update Indonesia: Production, Export and China Ban

Indonesia’s Ministry of Energy and Mineral Resources said that in the period January-August 2014 Indonesian coal production reached 280 million tons and coal exports 224 million tons. Director General for Coal and Mineral Resources R. Sukhyar added that miners that hold Coal Contracts of Work (PKP2B) account for 80 percent of total domestic coal production, while Mining Business Permit (IUP) holders account for the remainder. The Ministry targets total coal production to reach between 390 and 420 million tons in 2014.

The Ministry expects that 90 million metric tons of coal will be absorbed by the domestic market in 2014. The Indonesian government aims for more domestic consumption of coal as it wants coal to supply around 30 percent of the country's energy mix by 2025 (from 24 percent in 2011), in an effort to reduce the country’s dependence on expensive oil as a source for power generation.

Indonesia's Tighter but Confusing New Coal Export Policy

The Ministry expects that the recent confusion that occurred in Indonesia’s coal mining industry due to the tighter export policy will not translate into a significant disturbance of the country’s coal exports. This new policy stipulates that Indonesian coal miners need to obtain a ‘listed exporter’ status (Eksportir Terdaftar, ET) from the Energy and Mineral Resources ministry to export coal. The new rule applies to both PKP2B-holders and IUP-holders. However, many Indonesian miners many faced difficulty to obtain the new license amid a lack of clarity regarding the new legal framework. Therefore, the Indonesian government delayed implementation of the new policy by one month (initially the policy would come into effect starting on 1 September 2014).

To obtain the ET, Indonesian coal miners need to seek a recommendation from the Ministry for Energy and Mineral Resources first as stipulated by Regulation of the Director General of Mineral and Coal No 714 K/30/DJB/2014 (Peraturan Dirjen Minerba No 714 K/30/DJB/2014). To obtain the recommendation, the miner is required to show documents that prove it has met tax and royalty payment obligations. It is also mandatory to have the clean and clear certificate (CnC). This CnC certificate shows that the miner has no outstanding royalty and other tax debts, fulfilled exploration and environmental commitments, has no property delineation issues and obtained forestry permits.

This new policy is made in order to optimize state revenue from the coal mining industry and have more supervision on coal exports (illegal coal shipments are currently still a big problem).

Up to September 2014, 137 Indonesian miners have requested for the recommendation of the Energy and Mineral Resources Ministry, 47 of which have obtained the recommendation.

China’s Coal Import Ban

It was reported that, starting from 2015, China may ban imports and local sales of coal that contains high levels of ash and sulphur in an attempt to tackle air pollution. This policy is expected to hit Australian miners the hardest as China, the world’s second-largest economy, imported approximately 54 million metric tons of Australian thermal coal in 2013, most of which does not meet the newly proposed restrictions.

However, the negative impact of this new policy on Indonesia, the world’s major steam coal exporter, is limited as Indonesia mostly ships coal with low heating value, sulphur and ash content.

Source: Indonesia-Investments