Singapore: Indonesia, the world’s largest exporter of coal for power stations, is set to follow China in cutting shipments as new generators increase domestic demand, the head of the Indonesian Coal Mining Association said.
Overseas coal sales, which have doubled in five years, may peak at 170 million tonnes (mt) in 2007 and stall at that level for a few years before declining to as little as 100mt a year, said Jeffrey Mulyono, chairman of the association. The country needs to find new reserves before it can boost exports again, he said.
Any decline in Indonesian exports may worsen a shortfall caused by port and rail congestion that limited Australian shipments and a cut in deliveries from China that may turn the world’s biggest energy market into a net importer. Buyers led by Japan, South Korea and India have relied on Indonesia to meet increased consumption fuelled by economic growth in Asia.
“The world will take any amount we produce, but it’s impossible to allocate all the coal to exports,” said Mulyono, who chaired Monday’s opening session of the two-day Coaltrans Asia Conference in Bali. “We need the foreign exchange, but we also need to secure supply for the domestic market.”
“Indonesia is under the spotlight as buyers will likely turn to the country to fill the gap left by limited growth,” said Erindra Krisnawan, an analyst at UBS AG in Jakarta. “The big theme is exports to China.”
Indonesia’s government, which is drafting a new mining law, may restrict overseas sales to secure domestic coal supplies, Krisnawan said.
Indonesian minister of energy and mineral resources, Purnomo Yusgiantoro, Peter Ball, vice-president of PT Bumi Resources, and Diego de Bourgues, chief executive of Total SA’s coal unit, are among the speakers at the conference.
Rising demand has pushed coal producers to step up investments and open new mines.
Straits Asia Resources Ltd, a Singapore-listed coal producer with mines in Indonesia, plans to boost output by 50% to 6mt annually in the first quarter of 2008, Straits Asia said on 26 April.
Indonesia is the second-largest exporter to China, with first-quarter exports more than doubling to 4.84mt, Krisnawan said.
As China’s demand surges, the world’s biggest coal producer is cutting its overseas sales. China may reduce coal exports to 47mt in 2008 from an estimated 55mt this year, 63mt in 2006 and as much as 94mt in 2004, Macquarie Research said in a 14 March report.
China’s coal shipments fell 18% to 4.46mt in April, valued at $270 million, the Beijing-based Customs General Administration of China said.
“Asia poses a large area of uncertainty for world coal trade projections,” the US Energy Information Administration said in its International Energy Outlook report for 2007. “China has the potential to influence the market either as an importer or an exporter.”
The need to secure supplies prompted Tata Power Co., India’s second-biggest utility, to pay $1.3 billion for a 30% stake in two mines owned by Indonesia’s Bumi Resources.
“The only place that doesn’t have any constraint is Indonesia and they are putting on mining capacity relatively rapidly,” said David Fergusson, head of Indonesian research at Citigroup Inc. “Set against that, there’s sharp demand in India and China, so the demand and supply situation is very tight.”
The Indonesian government wants state utility PT Perusahaan Listrik Negara and private power producers to add 20,000MW of generating capacity, mostly fired by cheaper coal, by 2010 to cut electricity costs.
That may add as much as 70mt to domestic demand annually, according to the coal association’s calculations. Indonesian utilities consumed 45mt of coal last year.