May 31, 2016 - Indonesia, the world's top thermal coal exporter, expects its coal production to edge down in 2017, as smaller miners cut output due to a plunge in prices for the commodity.

Reduced output from the Southeast Asian nation could provide some support to prices that hit their lowest in 10 years earlier in 2016 due to slowing demand, new supply from South America and depressed oil prices.

"It's natural selection. The small mines that are not efficient will not be strong and will die," Bambang Gatot, director-general of coal and minerals, told reporters at an industry event.

Smaller miners are expected to find it difficult to market their coal and "will face obstacles", Gatot said.

Indonesia will churn out 419 million metric tons of coal this year and 409 million tonnes in 2017, Gatot said. That compares with "above 400 million" in 2015, he added.

Government statements in January had said that Indonesia produced 392 million metric tons of coal last year.

Meanwhile, Fabio Gabrieli, a trade analyst at Mercuria Energy Trading, said Indonesia's coal exports could drop by 22 million metric tons this year, hit by waning appetite in key market India. That country is looking to buy higher quality coal more cheaply from sources such as Australia, South Africa and Colombia.

According to data presented by Gabrieli, Indonesia shipped 350 million tonnes of thermal coal in 2015, a significant portion of the total 880 million metric tons of seaborne thermal coal traded last year.

Global thermal coal trade is expected to drop by a further 30 million metric tons in 2016, Gabrieli added. That would follow a 45-million metric ton fall in 2015.

On the sidelines of the event in Nusa Dua on the island of Bali, an official at the country's state electricity firm told Reuters that demand for coal at Indonesian power stations would increase by around 7.5 percent to 86 million metric tons in 2017 after a 13 percent increase to 80 million metric tons this year.