JAKARTA (TheInsiderStories) – Indonesian government has set its coal benchmark price for June at US$81.48 per ton, sliced 0.46 percent from May at $81.86 a ton, energy and mineral resources (EMR) ministry said on Monday (06/10).
It said, June marked a tenth straight monthly drop for the benchmark price and the lowest price since July 2017. The Indonesian benchmark price has been under pressure in recent months due to import restrictions in markets like China and India, although the decline rate in June slowed from the previous month’ rate.
June coal benchmark price has been determined in accordance with Minister EMR Decree Number 92K/30/MEM/2019 regarding the reference price of reference metal minerals and coal prices for June 2019. The benchmark price was obtained from the average of the four indices in the previous month, with the quality being equalized to calories 6,322 kcal/kg GAR.
The coal price formula is determined based on the international market index. There are 4 indexes used, namely the Indonesia Coal Index (ICI), New Castle Global Coal, the New Castle Export Index, and Platts59. The weight of each index is 25 percent in the coal price formula.
Executive Director of the Indonesian Coal Mining Association Hendra Sinadia revealed, the cause of the ongoing downward trend was partly due to market conditions that had already been oversupplied.
“The ICI, Newcastle, and Global Coal Index also continued to decline. Even Global Coal last month reached the level of $81 metric tons, now at the level of $72,” he said.
In addition, Sinadia adds, the declining factor of demand from China also affected, among others, due to the increase in China’ hydropower generating capacity, coupled with the strengthening of the issue of a trade war with the United States which encouraged the weakening of the currency.
Furthermore, he said that China’ policies that still reduce coal imports from Australia triggered a weakening of the Newcastle and Global Coal indices. While coal imports from several countries such as South Korea also declined because their stock is still quite high and also competition from gas and nuclear fuel, he adds.
Meanwhile, Indonesia Mining Institute Chief Irwandy Arief, noted coal prices in Asia are still influenced by policies in China and India. In the interests of the domestic coal industry, China seems to still adhere to regulated prices, which keep prices at $61 to $81 a ton, he said.
In India, the policy to gradually reduce coal imports seems not yet fully planned. This was caused by the development of alternative energy which was still not as planned.
He reminded that the tendency of coal companies to increase the amount of production needs to be watched out. Irwandy predicted, despite a downward trend, coal prices this year will still be in the range of $60 t0 $80 per ton.
“If the desire to increase production can be controlled by long-term planning, the price of coal will still last in the range that I mentioned. At least until the end of this year,” he said.
Earlier, he said that the sentiment of a trade war between China and the United States would have an impact on Indonesian coal. He also predicted that this short-term trade war would indeed have a negative impact.
However, in the medium term, the coal industry in Indonesia can take advantage of the moment of this trade war. Because the industry opportunity in China to expand its investment in Indonesia will be open so that it can encourage industrial growth and increase coal demand.
“If Short term is possible to lose, I think the medium term is positive. Demand (coal) will definitely increase because the industrial investment will continue to increase,” he ended.
Written by Lexy Nantu, Email: email@example.com