* Coal association warns of 40 pct fall in output
* Seeks delay in hike until coal prices top $100 a tonne
* Royalty hike could lead some smaller miners to cut output
(Adds quotes, details)
By Fergus Jensen
JAKARTA, Sept 9 Indonesia's coal trade group
asked the government on Monday to postpone plans to hike
royalties on output for some miners to avoid a further blow to
an industry already battered by coal prices that are near the
lowest in almost four years.
The Indonesian Coal Mining Association warned the world's
top thermal coal exporter could see output tumble by as much as
40 percent next year if the government hikes export taxes and
royalties paid by mining permit holders, known as IUP.
Indonesia ships around $2 billion worth of coal a month, one
of its largest exports by value. A drop in output would
exacerbate the country's current account deficit, which is
already a concern for investors as Southeast Asia's largest
economy fights a weakening rupiah, rising inflation and the exit
of foreign capital.
The trade group said the government should hold off on its
plans for a royalty hike with coal prices down by more than 15
percent so far this year at around $77 a tonne.
"Anything below $100 a tonne we would ask the government not
to increase from the current royalty scheme," Pandu Sjahrir,
commercial committee chairman of the Indonesian Coal Mining
Association, told reporters. "But if it's above $100, then we
Indonesia in January plans to hike royalties for IUP miners,
which include PT Perusahaan Perseroan Aneka Tambang
and PT Bukit Asam, to between 10 and 13 percent from
3.5 to 7 percent currently. The government postponed the royalty
hike this year due to the downturn in coal prices.
The trade group warned that the royalty hike could cause
more than half of Indonesia's miners to operate at a loss,
leading many to halt production.
"It's cheaper to shut down production than to run a business
at a loss," Sjahrir said.
The IUP licenses are normally held by smaller or newer
miners so the move will not affect major miners with Coal
Contract of Work licenses, such as top producer PT Bumi
Resources, which already pay royalties of 13.5
The industry group supported a royalty hike of 1.5 percent
only after coal prices recovered and were trading between
$100-110 a tonne.
"The royalties are still being discussed because it's the
easiest way for (the government) to increase income," Sjahrir
said. "But it won't (increase income) ... what you will have is
more illegal mining. That's the biggest issue."
If the royalties were unchanged, Indonesian coal output in
2014 would likely remain steady, he said.
The coal mining group expected benchmark Newcastle thermal
coal prices to trade between $77-80 a tonne over
the next year, slightly higher than Friday's weekly index price
Indonesia relies on exports of coal, natural gas, palm oil
and textiles to offset increasing imports and improve its trade
balance sheet. The fourth most populous country recorded its
first annual current account deficit in 2012 at $24 billion, and
most economists believe that will rise this year.
The deficit, running at an unsustainable level of more than
4 percent of GDP, is heavily skewed by domestic structural
issues including fuel price subsidies and a high demand for
imported capital goods that suggest it will be hard to tame.
(Writing by Randy Fabi; Editing by Tom Hogue)