COAL BUSINESS MUST IMPLEMENT GOOD MINING PRACTICES

Indonesian Coal Mining Association (APBIK) invited its member to restore coal industry in Indonesia. Bob, Kamandanu, General Chairman of APBI, on Wednesday (2/20), hoped that the coal industry will find a new form according to its destiny, namely a mining industry uncontaminated by financial engineering, speculation, or shot-term games.

Bob explained that coal business is a long-term business. Players in the coal industry must implement good mining practices, have a correct mining design, conduct exploration lawfully, and manage the environment properly in order to produce coal output which is according to market expectation. “We expect to have rightful players in this industry with rightful output”, he said.

Bob predicted that thus year there will be a massive consolidation in coal industry as well as acquisitions of small-scale companies. In line with the decline in coal price last year, it seems that the price decline will continue this year. Small-scale coal mining companies will be acquired by large-scale ones. He predicted that coal industries established in 2010-2011 will not be surviving this year. The reason is that formerly they could enjoy a margin at USD20-25 per ton, but now the price has dropped from USD120 ton to USD per ton approximately, so their margin becomes zero. Because of this, there will be consolidation, merger, and acquisition by large-scale companies.

Bob said that large-scale coal mining companies once experienced difficult times. APBI believed that this year many coal mining companies will not boost production if demand is low. In addition to that, in 2013, coal production will be stagnant as many small players will no longer be engaged in coal business. Coal production in 2013 will be flat or it will not change much from production in 2012. Coal production is predicted at 340 billion ton or same as last year. He said that it is better to hold production when price is low.

Meanwhile, the government imposes Domestic Market Obligation (DMO) in 2013 at 74.03 million ton. The DMO volume is equivalent to 20.3% of production target for next year which is projected at 337 million to 366.04 million to 366.04 million ton. Compares to coal production last year at 332 million ton, projection of coal production this year increases 10.24%. Yet, however, DMO volume this year is estimated to decline 

compared to last year at 82.02 million ton.

 
Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Thamrin Sihite, said that DMO must be fulfilled by 74 coal producers. And, realization of supply can be higher than the one that has been decided. DMO is set forth in Decree of Minister of Energy and Mineral Resources No. 2934/2012 on Stipulation of Demand and Minimum Percentage of Coal Sale for Domestic Interest for 2013. (E).


Business News - February 22,2013