October 18, 2016 / 8:45 AM / a year ago

Indonesia says coal price rally to extend into Q1, boost mining revenues

JAKARTA, Oct 18 (Reuters) - The current rally in thermal coal prices could extend through to the end of the first quarter of 2017, an Indonesian mining ministry official said on Tuesday, helping cash-strapped miners boost revenues in Southeast Asia’s largest economy.

Coal prices sank 70 percent over 2011 and 2015 amid worries imports by top consumer China had peaked on measures to combat pollution. However, contrary to expectations of further falls, prices have rallied by about 75 percent this year with producers trimming supply due to concerns over demand.

Indonesia, where thousands of coal mines went out of business as prices cratered, is now confident of achieving its target of 30.11 trillion rupiah ($2.32 billion) in non-tax revenue from the coal and minerals sector this year, Coal and Minerals Director General Bambang Gatot told Reuters.

In 2015, the world’s top thermal coal exporter had missed its target by 43 percent.

“Right now we’re almost at 50 percent. With the rise in coal prices hopefully we’ll reach it,” Gatot told Reuters.

Given the mining sector accounts for around 4 percent of Indonesia’s GDP, any rise in revenue would be welcome news for the government at a time when the country’s fiscal deficit is expected to widen to 2.7 percent of GDP from the 2.15 percent initially planned.

In the first half of 2016, Indonesia’s non-tax revenues from mining reached 12.3 trillion rupiah, about 40 percent of the full-year target, the finance ministry website shows.

Higher coal prices are “good for state revenues, and will give breathing space to coal companies that were trying to keep running to survive”, Gatot said. ($1 = 12,983 rupiah) (Reporting by Fergus Jensen, additional reporting by Gayatri Suroyo; Editing by Himani Sarkar)

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