Session timeout

Sorry, your session timed out after a long time of inactivity. Please click OK and Sign In again.


OK

Holding on to Indonesia’s coal: export bans and taxes

Restrictions have yet to be placed on Indonesia’s coal, but with levies already announced for other mining industries and a government call to meet domestic coal needs, bans and taxes seem inevitable.

The message from Jero Wacik, Minister for Energy and Mineral Resources was clear: “we cannot say no to coal exports, but the priority of resources has to be for domestic needs, so exports have to be controlled”.

Wacik made his remarks during the opening session of Coaltrans Asia and his words had a profound effect throughout the annual three-day conference held in Bali, Indonesia.

Domestic economic growth stood at 6.5% in 2011, with government policies to increase that percentage in the future. Such growth will see Indonesia’s coal consumption rise.

Coal’s role in the country’s energy consumption mix also echoed domestic needs. By 2025, coal will contribute 30.7% to the mix, up 6.2% from the current 24.5%.

Minister Wacik gave no further details on coal restrictions and the industry so far remains unaffected by a series of regulations on mining, including a 20% tax on the export of unprocessed minerals implemented this year.

Director General of Mineral and Coal, Thamrin Sihite, also speaking at Coaltrans reiterated the Minister’s view: “policy direction is focused on domestic market obligations.”

Indonesia is the world’s largest supplier of thermal coal. Currently, 25% of the country’s national production is consumed domestically, with 75% in exports. “Even though domestic needs are relatively small, the policy is shifting so the two can balance,” said Sihite.

Helmi Najamuddin of state-owned PT PLN backed this up even further with his predictions for domestic coal consumption. He saw demand growing by 10% next year to 63.2 million tons and 68 million tons by 2014 and a forecast that in a decade domestic consumption will double to 125.7 million tons.

Industry players have directed much criticism towards the government over their ambiguity on the subject. While the policies are aimed at increasing Indonesian growth, without clear details they are also casting uncertainty over the industry.

Hesitation also exists over government regulations to process coal before export, however, “for Indonesian coal producers there is no commercially viable option to enhance coal” said Andrew Forrest at Coaltrans, Chief Executive of Fortescue Metals Group.

It is thought China and India will suffer the most from an export ban or taxes as Indonesia’s top buyers. Any rise in costs will cause them to look for alternative supplies.

The possible restrictions come as Yuji Kakimi, Chief Executive & Director of Japan’s Chubu Energy Trading announced at Coaltrans that, “Japan’s energy policy needs to be less dependent on nuclear power, and there is possibility for new coal-fired power stations in the future”.

Recent natural disasters have caused Japan to revaluate its energy policies, with coal being considered as an alternative. However, Kakimi was quick to point out: “any taxes imposed on coal would cause Chubu to consider alternative supplies to Indonesia”.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

Related Insights