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Indonesia Lifts Coal Export Target



By Antonio delos Reyes and Andrew Jones

June 11, 2020 - The Indonesian government has raised its 2020 thermal coal export target and says it expects to meet its annual production goal this year, although the sector will still decline on the year as a result of weakening global demand driven by the coronavirus pandemic.

Indonesia is on track to achieve its 550mn t production target this year, according to a statement from the energy ministry today, while exports are expected to reach 435mn t, which is 40mn t higher than the government's previous stated goal of 395mn t.

Indonesia produced 616mn t in 2019 and exports rose by 6.4pc on the year to 456.4mn t, of which thermal coal accounted for 428.8mn t, according to government statistics agency BPS.

The government's latest forecast is based on coal production over January-May, which has been quicker than the necessary rate and totalled 228mn t, or 41pc of the 2020 target. But the target also suggests that production will fall on the year by an average of 6.5mn t/month and by 45.6mn t in total in the seven remaining months of 2020.

Indonesian coal output in January-May fell by 8pc on the year according to government data, driven by increasingly steep falls in April and May. The impact of Covid-19 on domestic coal mining and international demand was the key driver of lower output, the ministry said.

Output in April fell by 11.5pc from a year earlier to 42.9mn t, while May production fell by a steeper 30pc to 37.8mn t, according to the latest production figures reported by the ministry through the Mineral One Data Indonesia database.

The new export target has risen to 435mn t on the government's expectation that the country will be able to boost shipments to emerging markets such as Vietnam, Pakistan and Bangladesh to make up for a steep fall in domestic consumption this year, driven by Covid-19. Indonesia's domestic coal demand could fall to as low as 100mn t in 2020, according to forecasts from the Indonesian coal mining association (APBI), which would be short of the government's 155mn t target and down from 128mn t in 2019.

The ministry is also looking at improving the efficiency of the coal supply chain to existing coal-importing countries, while at the same time reducing the dependence of the Indonesian coal mining industry's dependence on historical markets such as China and India.

But as with production, the government's latest outlook still points to weaker monthly exports for the rest of the year compared with 2019. Exports will need to average 37.1mn t/month over June-December to reach the target, compared with 37.6mn t in 2019. This would mark a quick recovery from the steep drop in exports that the government's figures imply for April and May (see chart).

But the ministry has not ruled out revising its production target in the near future, as coal mining companies have started submitting revisions to their work plans and output targets. Coal prices are hovering near historic lows because of the economic slowdown driven by the Covid-19 pandemic, which could prompt coal mining companies to halt operations as profit margins are eroded, the ministry said.

The weak demand outlook for exports and domestic consumption this year has prompted the APBI to ask the country's producers to reduce output. Steep price falls have already prompted some producers to reduce output, while other firms are reviewing their production plans for this year.

Indonesia's largest coal producer Bumi Resources has lowered its 2020 output guidance to 85mn-90mn t from a previous target of 94.5mn t. The firm expects coal sales to India and China to fall as a result of the pandemic. The two countries accounted for 40pc of Bumi's total sales volume in 2019.