Overview on Global Coal Industry (National & International)

Overview on Global Coal Industry (National and International)

Global Coal Industry Overview

The global coal industry in 2015 remained challenging as the result of the continuously declining global coal prices. Newcastle Global Coal Index fell from USD67 per ton in December 2014 to USD55.85 per ton in December 2015. Such pressure on coal market price was influenced by the weakening global economy and the global pressure regarding climate change that led to the coal oversupply. 

The negative sentiment on coal utilization as the main cause of greenhouse gas emission and the rising temperature of earth's surface impacted heavily on global coal consumption, forcing several countries to limit and even reduce their coal consumption for their energy needs. Moreover, China's policies to protect its coal industry, namely the export limitation, implementation of trace element regulation and import taxes, as well as tax incentives for domestic coal consumption, severely drove the weakening global thermal coal prices.

Graph NCP Trend 2013 - 2015.jpg

Despite the downturn in China's coal import, global demand for thermal coal in 2015 continued to be supported by the increasing coal imports by India and the rising demands from Southeast Asian countries.

National Coal Industry Overview

The falling global coal prices also impacted directly on Indonesia's coal industry as the largest thermal coal exporting country in the world. In tandem with the declining trend of global coal prices, the Coal Reference price also continued to move downward during 2015. The nation's coal reference price was recorded to fall by more than 17%, from USD64.65 per ton in December 2014 to USD53.51 per ton in December 2015.

Graph CRP Trend 2013 - 2015.jpg

The Indonesian Coal Mining Association (APBI) recorded that due to the decrease in seaborne coal import market and falling global coal prices, 65% of the domestic coal producers reduced their production activities. Thus, the declining trend in Indonesia's coal production still continued since the peak period of the national coal production volume in 2013 which reached 474 million tons.

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Total national coal productions in 2015 decreased more than 14%, from 458 million tons in 2014 to 392 million tons. Meanwhile, the national coal exporting volume during the year experienced a major downfall of around 23%, namely to 295 million tons from the 2014 volume of 382 million tons. On the other hand, despite not being able to cover the decreasing exporting volume, domestic coal consumption demonstrated an increase of 8% per year during the last five-year period. Domestic coal consumption in 2015 grew more than 14%, from 76 million tons of coal consumed in 2014 to 87 million tons. 

The decreasing global oil price and depreciation of Rupiah exchange rate gave certain advantages for coal mining industry in maintaining its profitability. Unfortunately, these factors have a possibility to flip over to major disadvantages for the industry if the oil price and Rupiah exchange rate strengthened without increase in global coal prices.