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Tuesday, 19 January 10
COAL FOR DOMESTIC USERS
 While the government is already almost a year behind schedule in issuing regulations to implement the new mining law, mineral producers have been worried about the domestic market obligation (DMO) that the Energy and Mining Resources Ministry imposed through a ruling late last month.
Their concern is not so much about the requirement to allocate a portion of their output to domestic users, but the lack of clarity regarding how the volume of domestic needs for each mineral is set, how the obligation will be distributed among the producers and how the prices will be determined.
Mineral producers (other than oil and natural gas) are fully aware that they should fulfill domestic needs. That requirement is also by and large stipulated in their mining contracts. However, the DMO will create new uncertainty if this obligation is not based on clear-cut regulations.
Unfortunately, the Dec. 31, 2009 decree by the energy and mineral resources minister is mostly about repressive measures for companies failing to meet their DMO. It stipulates that producers who fail to realize their DMO are liable to a 50 percent cut of their output for the following year.
What is encouraging to note is that a similar penalty is also imposed on domestic users failing to take up their annual quota — their annual quota will also be cut by 50 percent. This enforcement is important because the volume of the DMO is based on the domestic market demand, which in turn is based on the annual needs of domestic industrial users each year.
The most affected by the DMO policy are certainly coal producers, who have made Indonesia the world’s largest seaborne exporter of thermal coal with an estimated output of 230 million tons last year, of which only about 50 million tons was used locally. However, the domestic demand for coal is estimated to almost double this year with the coming on stream of several power plants run by state electricity company PT PLN, all fired by coal. They are part of the government’s crash program to build 10,000 megawatts in additional capacity at PLN’s plants.
The government has strived to achieve the right balance between maximizing export revenues from coal and also securing supplies for domestic users. The challenge, though, is how to make producers accept domestic prices as fair compared what they get from exports.
Put another way, there should be an Indonesian coal reference price index that is acceptable to both producers and users, taking into account such factors as the coal’s calorific value, moisture content, etc. Such a reference price index is crucial because, unlike other minerals that have commodity exchanges of their own for price formation, coal doesn’t have any exchange of its own.
In the past, the domestic purchasing price of different grades of coal was often considered arbitrary, which acted as a disincentive for some producers to produce and sell higher-quality coal to PLN, the largest single domestic user.
Commercially, as long as the prices are right, producers will happily sell their output to the domestic market as this will cut the delivery time and freight costs.
The problem, though, is that the latest ministerial decree does not touch at all on a pricing mechanism for the implementation of the domestic market obligation, and this is creating a sense of uncertainty among producers.
Obviously the government needs to address this pricing issue immediately through another clear-cut regulation so as not to adversely affect new investment in the mining sector.
Source: Editorial, The Jakarta Post
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Tuesday, 02 March 10
INDONESIA'S PROTECTED FORESTS NOW OPEN TO DEVELOPMENT
The Jakarta Globe reported that, President Susilo Bambang Yudhoyono has signed a decree to allow mining, power plants and other projects deemed stra ...
Monday, 01 March 10
166 MINING COMPANIES THREATEN ENVIRONMENT
Viva News reported that, the Indonesian Forum for the Environment (Walhi) of East Kalimantan reveals that 166 coal mining companies, which are curre ...
Monday, 01 March 10
IRON ORE PRICE NEGOTIATIONS - 80PCT HIKE SEEN BY CHINESE
China Knowledge quoted an insider from a large Chinese steel company said there will be a significant increase in steel prices in the next few month ...
Sunday, 28 February 10
SUPRAMAX CHARTER RATES FOR ONE YEAR IS AROUND US$ 19,000/20,000 PER DAY - VISTAAR SINGAPORE
COALspot.com : The freight market firmed up by almost 10 pct on Supramax and Handy size and about 7 pct on Panamax.
However it was interesting to ...
Sunday, 28 February 10
MINISTRY SEEKS TWO YEAR DELAY TO IMPLEMENT ENVIRONMENT LAW
The Jakarta Post reported that, The ministry of energy and mineral resources has proposed that the government postpone the implementation of the 200 ...
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- Samtan Co., Ltd - South Korea
- Billiton Holdings Pty Ltd - Australia
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- London Commodity Brokers - England
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- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
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- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
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- Kumho Petrochemical, South Korea
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- SMC Global Power, Philippines
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- PTC India Limited - India
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- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
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- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Eastern Coal Council - USA
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- Coastal Gujarat Power Limited - India
- Africa Commodities Group - South Africa
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- Merrill Lynch Commodities Europe
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
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- Sinarmas Energy and Mining - Indonesia
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- Mintek Dendrill Indonesia
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
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- PetroVietnam Power Coal Import and Supply Company
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- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
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- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
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- Economic Council, Georgia
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- Directorate Of Revenue Intelligence - India
- Binh Thuan Hamico - Vietnam
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- Price Waterhouse Coopers - Russia
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- Bukit Makmur.PT - Indonesia
- Antam Resourcindo - Indonesia
- Lanco Infratech Ltd - India
- Minerals Council of Australia
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
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