Indonesia May Miss Coal-Production Target on Increased Rainfall in Borneo

Indonesia, the world’s second- largest coal exporter, may miss its 2010 production target for the fuel after a longer-than-usual rainy season disrupted mining, according to an industry group.

Output may be unchanged at 300 million metric tons this year compared with 2009, said Bob Kamandanu, chairman of the Indonesian Coal Mining Association. The group had an initial target of 320 million tons this year.

“Some producers had declared force majeure because of heavy rain and if the wet weather persists until the fourth quarter it will most likely hurt output,” Kamandanu said in a telephone interview from Jakarta today.

Increased rainfall is forecast in Sumatra, Kalimantan and parts of Sulawesi and Java in August and September, potentially disrupting agriculture and mining, the Meteorology, Climatology and Geophysics Agency said Aug. 11. Tin and palm oil output from the country may drop this year because of bad weather, industry officials said this week.

Kalimantan, on Indonesia’s part of Borneo island, is the country’s largest coal-producing region. The country is also the world’s biggest palm oil producer and largest exporter of tin.

“La Nina has caused extreme weather, similar to what we had in 1998 but with higher intensity,” Soeroso Hadiyanto, the agency’s deputy head for climatology, said Aug. 11. “We’re once again experiencing a wet dry-season in Indonesia, which will be followed by the rainy season from October, so we’ll see rain fall all year.”

Missing Shipments

PT Adaro Energy, Indonesia’s second-largest coal producer, said on Aug. 2 it may fail to reach its annual production target of 45 million tons if the “unprecedented” rainfall continues.

PT Bayan Resources, controlled by billionaire Low Tuck Kwong, said July 27 that its PT Wahana Baratama Mining unit had notified customers it will miss shipments.

“Some companies have anticipated the rains by building up inventories, but if it gets too heavy it could reduce the inventories, which in the end may hurt shipments,” Kamandanu said.

PT Bumi Resources, the country’s largest producer, will maintain supplies after starting the year with “a strategic opening inventory” of more than 5 million tons, Dileep Srivastava, a company director, said Aug. 5.

Bumi expects to achieve its 2010 output target of 67 million tons, even though rain in Kalimantan has been “unusually heavy,” by using the flexibility afforded by having multiple mines, Srivastava said. If the wet weather abates from September onwards, production levels may increase, he said.

The La Nina weather pattern, caused by a cooling of the Pacific Ocean, may bring increased rainfall to some areas of Borneo island, according to the Malaysian Meteorological Department.

Force majeure is a legal clause permitting companies to avoid meeting contractual obligations because of circumstances beyond their control.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net.

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