Coal production in Indonesia, the world’s largest exporter of the power-station fuel, may exceed the government’s 2014 limit even as a worldwide glut drives down prices to the lowest level in more than four years.
Indonesian output this year may rise to 425 million metric tons from 421 million last year, Bob Kamandanu, head of Indonesian Coal Mining Association, said in a March 28 interview. The government said it will cap production at 400 million as it tries to halt declining prices. The global supply of thermal coal will exceed demand by 4.9 million tons this year, Morgan Stanley said in a January report.
“The government has so far only requested miners limit production, but it doesn’t apply any clear regulation,” Kamandanu said. Output this year may exceed the 400 million ton mark unless the government specifies how it will limit production and penalize companies that overproduce, he said.
Asia Resource Minerals Plc’s Berau Coal Energy may shut its largest mine in the country. Glencore Xstrata Plc and BHP Billiton Ltd., the world’s biggest exporters, have either halted operations or shelved expansion plans in Australia.
Prices of the fuel at the Australian port of Newcastle were at $74.01 a ton in the week ended March 28, dropping 11 out of 13 weeks for a 13 percent decline this year, according to globalCOAL, a London-based data provider.
Indonesia may restrict the number of terminals allowed to export coal to “avoid illegal deliveries” and boost revenue, Edi Prasodjo, coal business director at the Energy and Mineral Resources Ministry, said in a September interview. Most Indonesian miners use barges to transport coal along rivers before loading it into larger vessels for overseas shipments.
Newcastle prices may average less than $80 a ton this year as an oversupply persists and a slowing global economy cuts demand, Kamandanu said. The grade averaged $85.27 a ton last year and $96.67 in 2012, according to data compiled by Bloomberg.
Asia Resource Minerals’ Berau Coal may close the mine accounting for almost half of the company’s 2013 output, Chief Executive Officer Nick von Schirnding said March 28.
Falling coal prices have forced more than 33 small companies in Jambi province on Sumatra island to cease operations, while many firms are trying to survive by cutting costs and boosting efficiency, Kamandanu said.
Glencore Xstrata agreed last week to a one-year deal to sell thermal coal to Tohoku Electric Power Co. at the lowest price since 2009. The price that Japan’s power producers negotiate with Glencore is typically used as a benchmark for contracts across Asia.