COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal benchmark prices to US$ 64.48 per MT in April 2015 from March reference price of US$ 67.76. The month of April price reference for Indonesian coal declined 4.84% or $ 3.28 per MT month over month.
Indonesian coal benchmark price for April 2015 was calculated based on calorific value of 6,322 kcal/kg (GAR), stated to be using a formula based on the March 2015 index average of ICI-1 (Indonesia Coal Index) 25%, Platts-5900 25%, NEX (Newcastle Export Index) 25%, and GC (globalCoal Index) 25% and its was calculated considering coal with GCV (GAR) 6,322 kcal/kg, Total Moisture (arb) 8.00%, Total Sulphur 0.8% (arb), Ash Content 15 % (arb) and delivery free on Board (FOB) Vessel basis and apply to spot contract, delivery between 1 – 30 April 2015.
The highest HBA was declared in February 2011 at US$ 127.05 per MT, which was US$ 59.29 per ton higher than this month’s declared HBA of $ 67.76 per MT.
The government of Indonesia is publishing a monthly coal price reference (HBA & HPB) since January 2009 to be used by coal producers for all spot and term contracts. However, the official implementation of HBA was commenced since September 2011. According to government regulation, the coal benchmark price must be used by the holders of production operation IUPs, special production operation IUP's, and CCoWs as a reference in determining the coal selling price for a particular period.
The declared HBA in April 2015 was 13.08 per cent or $ 10.33 lower compared to the same period in 2014. In the meantime, April 2015 HBA is US$ 62.57 or 49.25% lower compared to all time high HBA which was declared in February 2011.
February 2011 declared HBA was the highest since the launching of HBA by the government of Indonesia (US$ 127.05 / MT) and the lowest was declared in May 2009 (US$ 62.83/ MT).
The April price was only valid for the spot price (loading on or before 30 April 2015), while as for term price (up to 12 months supply), the average reference price (HPB) of the previous three months will be used to determine the selling price. (50 percent of the latest available month HPB, 30 per cent of one month prior HPB and 20 percent of two-month prior HPB).
The government also declared price marker for eight brands of Indonesia's coal, which are most commonly traded in the market. Those eight brands act as the benchmark and used to calculate other 66 coal types with a quality similar to the coal price markers.
For sales in the barge, the reference price is reduced by barging and trans-shipment costs from the barge to the vessel. The government has recently issued a regulation (644.K/30/DJB/2013 dated 21 March 2013) to regulate or determine coal prices on FOB barge. The government also fixed the freight for barging, surveyor, insurance and etc., to determine FOB barge price. Transshipment cost US$ 4.00/MT + Surveyor cost US$ 0.25/MT + Insurance 0.80% per shipment + Barging cost (for 270 footer - (US$ 0.0221 X barging distance) + US$ 3.7406, for 270 - 330 footer - (US$ 0.0184 X barging distance) + US$ 3.1172 and > 330 footer - (US$ 0.0154 X barging distance) + US$ 2.6002.
The coal price reference is being established to fulfill the requirement of mining law 04/2009 and ministerial decree No.17/2010. In addition to that, it aims to increase government revenue from royalties from coal producers.
The coal prices are now trying to settle at a new level and it may not to move upwards or the price levels of year 2008 or 2011 once again in near future unless there is a miracle happens. The excess of coal supplies and low demand are still to be blamed for price recovery delay from this level to a higher level. Today’s price levels are not supporting any new investments and new explorations in coal mines. It would be nice to see coal prices settle at a point where both the producer and consumer can sustain.
New chief for ICMA
The Indonesian coal mining association has recently elected its new chief for the period 2015 – 2018. Pandu Sjahrir, the newly elected chairman of the Indonesian coal mining association and Vice President Director cum CFO of Toba Bara is in opinion that, Indonesian government must work with mining companies and not against it. Pandu Sjahrir is also strongly believed that, the eliminating illegal mining in Indonesia must be a top priority of the government of Indonesia. Stopping illegal mining will definitely decrease the supply in the sea-borne market, therefore giving support to the coal price.
However, in the meantime, the new chief of the coal mining association also says that, the Indonesian government, in their rule-making process, sometimes deliberately leaves the industry out of the picture and he wanted the government to work together with miners as partners and to start thinking together about the energy policy for Indonesia for the next 25 years. He believes that, only by creating this partnership, can start thinking of the coal sector not just as a revenue source, but as a long-term national asset that can be utilized for many decades to come.
According to media reports, an Australian miner has settled the first annual coal supply agreement with a Japanese utility around 17% below the price that its achieved last year. This price agreement is again re-confirming that, coal miners see no signs of recovery in the near future.
