Sunday 7 July 2013

COAL CONSUMPTION IN THE DOMESTIC MARKET LOW



Indonesian Coal Mining Association (APBI) said that Indonesia’s coal production in the first quarter of 2013 reached 93 million tons. APBI Chairman, Bob Kamandanu, in Jakarta on Thursday (5/16), said that in general, production is up about 2% - 3% from 2012 production. High production increase up to 20% for medium and lower quality coal. Bob said that of the total coal production in the first quarter of 2013, approximately half of which are low quality coal. Low quality coal is also widely demanded by the export markets.
               
Although coal production increased, Bob said that absorption in the country has not grown significantly. He mentioned that absorption of coal by the domestic market is around 40 – 60 million tons per year. Because domestic consumption is still low, according to him plan to cap coal export has not been necessary. At this time, to determine future coal policy, Bob asked the government to provide data on Indonesian coal reserves and needs. APBI stated that in 2012, national coal production reached 384 million tons.
               
Meanwhile, the Ministry of Energy and Mineral Resources set target of coal production for 2013 at 390 million tons. Of this amount, 74.32 million tons were allocated to meet the domestic demand. APBI predicted that national coal exports this year to reach 320 million tons, or approximately 80% of the total production which is estimated at 400 million tons. The high export of coal is due to the low absorptive capacity of domestic coal consumers. “Consumption of coal in the domestic market is still low, so it is still oriented to the export market”, Bob said.
               
Coal produced by coal producers is exported to several countries, such as China and India. He acknowledged that the increase in coal production this year is not as aggressive as in the previous years because the world’s economic condition has not been fully recovered. Demand for coal is rising, but the increase is not so great. Moreover, there new emerging coal producers, such as Mongolia, Canada, New Zealand and United States which began flooding the market with their products. Excess coal supply also makes coal prices not to move up.
               
Meanwhile, relating to the government’s plans to issue a policy that bans export of raw mineral ores, coal, and gas which will be effective from 2014, the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) promised to encourage entrepreneurs to prepare themselves for the ban. According to Kadin Indonesia’s Vice General Chairman for Industry, Research, and Technology, Bambang Sujagad, entrepreneurs who wish to keep doing export should meet three conditions. Firstly, Mining Authorization (KP) owned must fulfill the clear and clean requirements given by the regent to the Ministry of Energy and Mineral Resources.
               
Second, mine operators must have submitted a proposal containing plans for the construction of smelter or cooperation with smelter owner to process the mining products produced. Third, mine operators are also required to pay taxes and duties that must be paid. Bambang said that the government gave two alternatives, namely granting quotas or payment of export duties. Bambang believes that payment of export duties is better option.
               
According to Bambang, there are some entrepreneurs who declared their intention to build smelter, such as aluminium smelter and nickel smelter in eastern Indonesia. However, Bambang admitted that not all mine operators are able to build their own smelter. Because, the construction of smelter requires a quite substantial amount of investment. (E)


Business News - May 22,2013

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