World demand is set to increase by 40% over the next eight years and Indonesia has yet to realise its potential in this market


Indonesia has yet to realise its potential in the metallurgical coal market, but this is set to change as world demand increases by 40%. “Metallurgical coal imports into China and India are increasing significantly. 10 years ago they used to represent 2% of the global market, now they represent 40%, when considering net imports,” said Renato Paladino, president of Arch Coal Asia Pacific and speaking at the annual Coaltrans Asia conference.


A large percentage of these imports come from Australia, North America and Mongolia, but as participants learned at Coaltrans Asia, Indonesia has great potential in the metallurgical coal arena.


“Indonesia has taken over Australia in the past 10 years as the largest producer and exporter of thermal coal,” said Pat Hanna, executive director of Cokal at the conference in Nusa Dua, Bali. “People still do not realise what Indonesia’s potential is in terms of coking coal,” he added.


Thermal coal production has exceeded the Indonesian government’s expectations and it is believed coking coal could do the same in the future.


This is especially true as Indonesia is a relatively young producer compared to Australia and the US. It is predicted that Indonesia would soon elevate its production and export capacity of coking coal well beyond what it is today.


Type and volumes

Currently in Central Kalimantan, BHP and Kideco are the two main operators through a joint venture. There are only two producers, MGM and AKT. At present, they produce around four million tons of coking coal a year.


Dr. R Sukhyar, head of the Geological Agency Indonesia reaffirmed at Coaltrans that: “Coking coal is only located in Central Kalimantan,” but did not expand on the potential or quantities.

Coal is located on the surface in Central Kalimantan and because of insufficient drilling in the area it is hard to know exactly how much coking coal may be available.

“You can get a really good estimate as a geologist and from the work I have done over the past 10 years in this area, it will be possible to mine about 10 billion tons of coking coal in the future,” said Hanna.


The potential of this coal is enormous and so far has shown to be of good quality. Phosphorous levels are low, which is especially good for India’s growing steel market. In addition, volatile matter ranges from 18% to 32%, which means blending will be possible in the future.


Logistical issues

The location of Central Kalimantan means that coal has to be transported around 774 kilometres from the basin to the Java Sea. The Barito River offers a viable transportation route, but it is shallow with depths of three to six metres, depending on rainfall.

For four to six months out of the year, it would be impossible to transport the coal because of these low depths. Storing the coal until the water level heightens is also not feasible, as coking coal goes off.


The best way to solve this problem is by using the Mississippi shallow river barging system, which has worked in Mozambique, where coal is transported along a river with depths as low as three metres.


In Mozambique, it was possible to push 20,000 tons of coal in three metres of water a day. Specialist marine architects put in place a system of barges and tugs. These same architects are now working on the Barito River.


The system is not new and has been operational in the United States for over 100 years. Hanna predicted that when the river is at three and a half metres, around 6000 tons of coal can be transported a day. If the river falls to two meters, around 3000 tons can be pushed. “This style of system could change Indonesia’s coking coal exports and has great potential for other remote areas in the country where coal is abundant,” said Hanna.


In terms of cost, it will be around $80 a ton using the Mississippi barging system, which means that profit margins remain healthy.


The future is bright

India and China are on Indonesia’s doorstep and this location means the country could deliver coking coal at a lower cost than other large exporters like Australia and the US.

“World steel consumption is projected to increase by about 40% between 2012 and 2020,” said Paladino at Coaltrans Asia. This large increase shows the great world demand for coking coal and it is hoped Indonesia will be able to supply some of this demand through its metallurgical coal resources.

The Mississippi river barging system is expected to be operational next year in Central Kalimantan. If successful, the system could be replicated throughout much of Indonesia’s remote areas.



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.