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Indonesian coal miner Harum Energy has bleak near-term outlook as H1 sales price falls 15%

Indonesian thermal coal miner PT Harum Energy posted a near 15% year-on-year slump in average sales price for first-half 2015, and said any recovery in prices looked unlikely in the near term.

"The market remains over-supplied, with few cuts in output by producers outside of North America," the company said in its quarterly report. "Thermal coal prices remain at eight-year lows."

The company's quarterly report dated July 31 was available on its website late Monday.

The company said a reduction in Chinese thermal coal imports this year had hurt Indonesian miners.

Chinese thermal coal imports slumped 44% year on year in the first six months of 2015 on a number of factors including price cuts from domestic Chinese producers; more stringent regulatory scrutiny by the government; an industrial slowdown reducing power demand; and increased competitiveness from the hydropower sector.

Harum said it sold about 44% of its volume in H1 2015 to South Korea, followed by Taiwan at 16% and Malaysia at 15%.

China accounted for only 11% of the sales volume, while India accounted for just 2%.

"The company has sold all its Q3 production and is in the process of selling its Q4 production," said Harum.

Harum, which has cash and cash equivalents of $192.3 million as of June 30, 2015, said it is planning to reduce 25% of its barging fleet starting in the third quarter to reduce fixed costs.

The company produced 2.3 million mt of coal in the first half of the year, sliding 46.2% from last year.

Sales volume slumped 38.5% year on year to 2.7 million mt in H1 2015.

Average sales prices for H1 2015 fell to $54.10/mt from $63.60/mt FOB in the same period last year, the company added.

Amid falling thermal coal prices, the company had suspended activity at one of its mines -- Santan Batubara -- in March 2014.

"SB is evaluating alternatives for conserving maximum value in SB as their reserves have high quality coal. The activity will be restarting once coal prices increase," the company had said.

The 90-day price of FOB Kalimantan 5,900 kcal/kg GAR coal has dropped about 11% so far this year, Platts data showed.

The SB mine accounted for a production of 400,000 mt in the first half of last year.

In H1 2015, FOB vessel cash cost, which includes mining, haulage, transportation and fixed overhead costs, fell 13.9% year on year to $35.90/mt, mainly due to lower average fuel price, the company said.

Harum has mining operations in East Kalimantan and produces coal with heating value ranging from 5,400-6,400 kcal/kg air dried basis, according to its website.

As of June 30, the company, said its inventory stood at 600,000 mt, up from 500,000 mt at the start of the year.

source: http://www.platts.com