Indonesia Plans to Cut Coal Output to Bolster Prices, Revenue
Mercator Lines Ltd. is looking to exit two Indonesia coal mines to repay debt. (Photographer: Dadang Tri/Bloomberg)

Indonesia Plans to Cut Coal Output to Bolster Prices, Revenue

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Indonesia ordered coal miners to slash output after record production and exports from the world’s largest shipper last year weighed on prices and state revenue.

The government has set the production target at 550 million metric tons this year, 9.8% below the 610 million tons in 2019, Energy and Mineral Resources Minister Arifin Tasrif told reporters in Jakarta on Thursday. Domestic consumption of the fuel is seen jumping 12% to 155 million tons, he said.

Authorities will ensure that miners stick to the cap as the government “doesn’t want coal production to be too massive and drive prices lower and cause government revenue to drop,” Tasrif said. “We will implement the domestic market obligation as well,” he said, referring to a rule requiring miners to sell 25% of the output locally at a fixed price.

Indonesia Plans to Cut Coal Output to Bolster Prices, Revenue

While coal is being squeezed out of the U.S. by cheaper natural gas and being driven out of Europe over concerns about climate change, global demand for the most-polluting fuel is still likely to rise over the coming years, driven by Southeast Asia, China and India, according to the International Energy Agency.

Coal prices in Indonesia slumped 28% last year, tumbling for a third year, as a global economic slowdown curbed demand. The decline in prices also hurt government revenue and contributed to a widening trade deficit in the Southeast Asian nation as coal remains the largest export earner.

Production surpassed the government target last year as about 1,000 companies started operations under fresh mining permits issued by provincial governments, Bambang Gatot Ariyono, director-general of minerals and coal, told reporters. The government plans to track their output through electronic reporting and regular monitoring of their work plan and royalty payments, he said.

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