Moody's Revises Bumi Resources' Ratings Outlook to Negative
The Coal Mines Operation - Photo by Bumi Resources

JAKARTA (TheInsiderStories) – Indonesia set the coal price reference US$100.89 a ton for October or lowered 3.7 percent compared to last month, said the spokesman on Tuesday (02/10). In September, the coal benchmark price was recorded at $104.81 per ton.

“The price decline was due to the end of the summer peak ands tock in the global market demand exceeded in August and September,” the ministry’s spokesman Agung Pribadi said on Tuesday (10/2).

The coal price formula is determined by the Ministry Energy and Resources Minerals (MEMR) based on the international market index. There are 4 indexes used, namely the Indonesia Coal Index, New Castle Global Coal, the New Castle Export Index, and Platts59. The weight of each index is 25 percent in the coal price formula.

Previously, the Indonesian Government has decided to cap ceiling price of coal fordomestic market obligation (DMO) at $70 per ton, for 6,322 calorie coal, or price is set based on the benchmark price if the coal price moves to below $70 per ton within two years period.

The MEMR’s decree – Number 1395K/30/MEM/2018 on the Price of Coal Used in the Power Plants for the Public Interest – also sets the maximum volume of coal to be purchased to generate coal-fired power plants at 100 million tons per year, or in accordance with the coal needs of the power plants.

The ministry said, the Government lowered the coal price for DMO to keep electricity tariffs unchanged until 2019. The cap on thermal coal for power is intended to shield state-owned power producer PT Perusahaan Listrik Negara from price fluctuations.

The coal price applies for the period of Jan. 1, 2018 until December 2019. This means that the price of coal for the ongoing contracts that have been applied from Jan. 1, will be adjusted with the new regulation.

The Government will issue Presidential Decree, Ministerial Decree as well as Ministry Stipulation in the immediate future that will give a mandate to the energy ministry to determine the floor and ceiling price of coal.

The energy ministry’s decision takes into account the Government Regulation Number 8, 2018 on the Fifth Amendment of the Government Regulation Number 1, 2014 on Coal and Mineral Resources Mining Business and the Energy and Mineral Resources Ministry Number 19, 2018 on the Second Amendment of the Energy Ministerial Decree Number 7 2017 on the Formulation of Sale Price of Minerals and Coal.

The ministry also said that as for coal with other calorie level, its price is converted into coal with 6,322 calorie level based on applicable formulation.

It added that the coal producers that are selling coal to the power plants will be allowed to add production by up to 10 per cent, if meeting the government’s requirements.

The EMR Ministry announced on March 7, that the Indonesian Coal Reference Price for March has been set at $101.86 per ton, up from $100.96 per ton in February. The price hike was driven by higher demand for coal from Indonesia’s key export markets, in particular, China.

The heavy rain in the first two months of the year which has disrupted coal production has also pushed up coal price. The March coal price is the highest in the last five years, the energy ministry said.

The above government decision on capping the coal price for domestic power sector has triggered heated public debate over the past few months.

Written by Staff Editor, Email: theinsiderstories@gmail.com