* Falling coal prices hurting Indonesia's small producers
* Some will close by year-end -industry association
By Michael Taylor
JAKARTA, June 18 Plunging thermal coal prices
will force some small and low-margin producers in Indonesia out
of business before year-end, an industry group said, cutting
output capacity in the world's top exporter.
The benchmark for Asian coal prices has dropped
16 percent so far this year and has traded at its lowest level
since late 2009 on fears of slowing growth in demand from China,
the world's No.2 economy. It dropped to $72.38 a tonne in the
week to June 13.
"It is in panic mode," said Bob Kamandanu, chairman of
Indonesia's Coal Mining Association, when asked about the
"Towards the end of the year, if there is no good news and
if the price stays between $72-$73 ... some companies will stop
and go out of business," he told Reuters on Wednesday.
But he added that Indonesian production would likely remain
flat this year and next at around 420 million tonnes, as a
possible 30-million tonne reduction in output as small mines
closed would be offset as larger companies ramped up mining.
A Reuters survey of the top six producers in March found all
aimed to boost production this year to compensate for continuing
low prices. Those firms include Bumi Resources, Adaro
and Berau Coal Energy.
Domestic coal demand will jump 29 percent to 90 million
tonnes this year and remain unchanged in 2015, said Kamandanu,
as more power plants start operating in the Southeast Asian
Top overseas buyers of Indonesian thermal coal include
China, India, South Korea, Japan and Taiwan, said Kamandanu,
adding that prices could recover to average $80 a tonne in the
second half of next year.
Indonesia is considering new regulations to limit coal
production and tighten controls on exports, government officials
said earlier this month, and could introduce the rules by early
But with campaigning underway ahead of the presidential
election on July 9 and a new government to be inaugurated in
October, Kamandanu urged the government to stop.
"Don't do anything - let a new government change things,"
said Kamandanu, who is also the chief executive at exploration
firm PT Delma Mining Corporation.
"I want it to be put on hold. Let this be the responsibility
of the new government."
The outgoing administration of President Susilo Bambang
Yudhoyono has also been mulling a hike in royalties paid on coal
sales by holders of so-called IUP mining licences, from the
current 3-7 percent.
The government has proposed raising royalties to 7-12
percent when benchmark prices go above $80 a tonne, said
Kamandanu, whose group is instead lobbying for a $100 threshold
and escalating royalty payments from that level.
IUP licences are normally held by smaller or newer miners so
any change to royalties would not affect major miners that
typically hold Coal Contract of Work permits, under which they
pay 13.5 percent.
Kamandanu also called for more action to crack down on
(Editing by Joseph Radford)