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Indonesia's domestic coal price cap sidelines miners

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Report summary

On 9 March 2018, Indonesia's Ministry of Energy and Mineral Resources, Indonesia announced that the decree on the coal price for domestic electricity supply needs would cap the HBA price at US$70/t. The cap was to apply from 1 January 2018 to 31 December 2019 to be reviewed after that. The government subsequently announced on 12 March it had revised the commencement date to 12 March. We believe the price cap could create a number of potentially unexpected consequences. As expected, PLN stands to win after suffering a fall in profit last year due to high coal prices and miners will lose margin on sales to the power sector. However, there is also the potential for disruption to domestic coal supply and future investment in the coal sector.

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    Indonesia's domestic coal price cap sidelines miners

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Table of contents

  • The government'smove to support electricity generators could lead to 10 Mt of coalbeing diverted to the export market.

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  • Cash costs to decline due to lower royalties
  • 2018 cash margins to decline significantly

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