Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Energy/  New rules to slash Indonesian coal exports in short term at least
BackBack

New rules to slash Indonesian coal exports in short term at least

Industry says the rules are poorly timed and could push many firms out of business with coal prices at a five-year low

The new regulations, intended to stamp out illegal mining and ensure ample coal supplies for domestic power plants, require exporters to get approval from the mining and trade ministries. Photo: AFPPremium
The new regulations, intended to stamp out illegal mining and ensure ample coal supplies for domestic power plants, require exporters to get approval from the mining and trade ministries. Photo: AFP

Jakarta: Indonesia’s coal exports are expected to fall by between 15% and 20% in October from September and could decline 5% this year as firms scramble to obtain government export permits to comply with new rules due to come into effect on 1 October.

The new regulations, intended to stamp out illegal mining and ensure ample coal supplies for domestic power plants, require exporters to get approval from the mining and trade ministries.

But the industry says the rules are poorly timed and could push many firms out of business with coal prices at a five-year low. Unregistered firms will not be allowed to ship coal past the deadline.

Many miners and traders have encountered delays and a backlog of firms have yet to be registered, Pandu Sjahrir, chairman of the commercial committee at the Indonesian Coal Mining Association (ICMA), told Reuters.

“A lot of the backlog happens to be at the coal and minerals directorate level. Everything has to be done manually," Sjahrir said, adding that firms needed to obtain the signature of each director at the department.

“A couple of major firms haven’t completed registration," he said, without naming the firms but adding that this year’s exports could decline by up to 5% as a result. He could not say how long it would take for exports to recover.

Indonesia, the world’s top thermal coal exporter, shipped between 25 million and 30 million tonnes of coal in September, according to the ICMA.

Previously, the ICMA had said it expected shipments to drop 14% to 300 million tonnes in 2015 as a result of the new rules, coupled with China’s import restrictions.

The association’s requests to the government to postpone implementation of the rules to give firms more time to adjust had been denied, ICMA chairman Bob Kamandanu told Reuters.

“They just said they would go ahead ... They have to give us some sort of leeway. (New rules) cannot be just created like this," Kamandanu said.

Government officials have declined to put an estimate on how much exports could decline.

“We have to look at the number (of firms) that have applied. I think hundreds of them are still in my office," coal and minerals director-general R. Sukhyar told reporters at an IHS Media Dialogue on Tuesday, adding there could be delays for the next month.

“Of course, production will slow down. This is certain."

Shaking Up The Sector

The central government is in the process of reconciling and renegotiating hundreds of licences and contracts issued by central and regional administrations, focusing on overlapping permits and unpaid taxes and royalties.

According to Sukhyar, 171 coal mining permits had been annulled this year, “many of them in production", as part of a broad effort to improve governance in the sector.

As of Friday, PT Arutmin, a unit of the country’s top coal producer, Bumi Resources, had not registered due to unpaid royalties.

In August the government warned it could terminate Arutmin’s contract if it had not paid up by the end of October. Arutmin produced 30 million tonnes of coal in 2013.

A spokesman for Bumi said one unit, PT Kaltim Prima Coal, had registered as an exporter and that PT Arutmin Indonesia was “following". Other coal companies had no immediate comment.

A drop in coal shipments, currently valued at around $2 billion a month, could increase Indonesia’s current account deficit, which has undermined investor confidence and will be a big concern for president-elect Joko Widodo.

The Southeast Asian country currently exports around 70% of its coal production, much of it to China and India, but Widodo wants to reduce exports to provide more supplies for power plants.

According to the mining and trade ministries, less than 80 of the roughly 1,450 coal producers in Indonesia were registered as of this week. Some 400 of these would not be eligible anyway because their permits had not been certified “Clean and Clear" as a prerequisite for export registration.

Of the 997 “Clean and Clear" licence-holders, only around 50 have registered so far, according to government data, including state-owned Bukit Asam.

However, according to Sukhyar, around 25 of the 55 firms with Coal Contracts of Work (CCOW), the older generation of mining concessions that contribute up to 85% of Indonesia’s coal output, have registered.

Among these are some of the country’s top producers, including Adaro Energy, Berau Coal and Kideco Jaya Agung.

Sukhyar declined to comment on how many firms were exporting coal before the registration rule was imposed.

The price of Asian benchmark Newcastle coal has dropped 20% this year to $65.83 a tonne in the week to 26 September, its lowest since 2009, due to heavy oversupply from new mines built when Chinese demand began soaring. Reuters

Fergus Jensen and Michael Taylor also contributed to this story.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 30 Sep 2014, 09:46 PM IST
Next Story footLogo
Recommended For You
Energy Stocks
₹1,824.250.53%
₹166.250.9%
₹516.82.34%
₹88.561.21%
₹330.651.6%
Switch to the Mint app for fast and personalized news - Get App