COALspot.com: The benchmark price of Indonesian thermal coal falls for first time in three months.
According to the latest ministerial decree No.1951 K/30/MEM/2018 dated 4 September 2018, the government has decreased Indonesian Coal Price Reference (HBA) by 2.80 per cent month on month to US$ 104.81 per ton for 6322 GAR power plant coal for September 2018 delivery for exports as well domestic end-users except for Indonesian power producers. For domestic power plants HBA has fixed at US$ 70 per ton or US$ 34.81 lesser than the export price.
However, the declared Indonesian thermal coal price reference for September 2018 delivery was 9.70% higher compared to January 2018 price.
Indonesia has capped the price of thermal coal for domestic power stations at $70 per ton (basis 6322 GAR Coal) if HBA is equal to or higher than US$ 70 per ton until December 2019 form 12 March 2018, in new rule was issued on 9 March 2018 (MEMR Ministerial decree 1395K/30/MEM/2018) and 1410 K/30/MEM/2018 dated 12 March 2018. However the HBA drops below $70 per ton, the domestic thermal coal price for power stations will revert to HBA. This special price for power plants is applicable for maximum100 million tons of coal per year.
US$ 70 price is based on coal as the same specification as in the Indonesian Coal Benchmark Price (HBA). Domestic Power producers used to buy 4200 to 5000 GAR coal where’s US$ 70 per ton was based on 6322 GAR coal.
An increase or decrease in four coal indices such as Indonesia Coal Index (ICI), Platts-5900, Newcastle Export Index (NEX) and Global coal Newcastle Index (GCNC) will cause an increase or decrease in Indonesian coal price reference every month, as HBA is linked to those coal indices. The ministerial decree No. 1951 K/30/MEM/2018 dated 4 September 2018 has not given any details about formation of HPB.
The coal price reference in Indonesia was established to fulfil 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 declared Indonesia thermal coal reference price (or called HBA) for February 2016 was the lowest in 117 months or since launching of HBA by the government of Indonesia. The royalties and taxes will be calculated based on this declared HPB. Interestingly, the highest monthly average price occurred in February 2011, while the lowest coal price also occurred in February 2016. The September 2018, HBA is 105.83% higher than the February 2016 price and 17.50% lower than the February 2011 price.
Indonesian coal benchmark price for September 2018 was calculated based on calorific value of 6,322 kcal/kg (GAR), stated to be using a formula based on the August 2018 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 September 2018 or until publish an new HBA.
The highest benchmark price was declared by the Ministry of Energy & Mineral Resources of Indonesia in February 2011, and this month’s declared price is around US$ 22.24 a ton lower compared to Feb’ 11 benchmark price. In the meantime, this month’s declared price was around US$ 53.89 a ton higher compared to Feb’ 16 benchmark price, which was the lowest price ever declared by DGoMC.
The government of Indonesia was publishing a monthly coal price reference (HBA & HPB) since February 2009 to be used by coal producers for all spot as well as term contracts.
However, the official implementation of HBA was commenced since September 2011 and 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 this month is valid for the spot price (loading on or before 30 September 2018 or until issuing a new HBA), while (as per previous HBA note) 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% of latest month's HPB (this month) 30% one-month prior HPB and 20% of two-month prior HPB).
The government used to declare the price marker for eight brands of Indonesia's coal, which were most commonly traded in the market. Those eight brands act as the benchmark and used to calculate other 69 coal types with a quality similar to the coal price markers. However this time, the government was issued price for HBA and no HPB prices was published.
COALspot.com, has used its own calculator which was developed based on HBA/HPB formula and terms and condition declared by DGoMC to calculate HPB prices for eight major brands and for other types of coals. The government has stopped declaring formulas or methodologies that used to calculate either HBA or HPB. COALspot.com now publishing HPB and other coal prices based on US$ 104.81 as well as US$ 70.00 for the basis 6322 GAR coal.
Click here for details of Indonesian coal price reference since January 2009.(cs).
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