Indonesian coal producers are cutting output in light of recently-imposed Chinese import restrictions and tumbling seaborne prices, sources from the region told Montel on Wednesday.
“Some mines have stopped, or are slowing production, because the price is very bad, but the mining costs are still high,” said a trader at the key export hub of Samarinda, in the coal-rich region of East Kalimantan.
“Also, demand for export is not so strong, so many miners right now are focusing on the domestic market,” he said.
While larger mines were reducing production, smaller pits were simply halting operations until market conditions improve, he noted.
Another Indonesian coal trader also said weak seaborne coal prices were eating into producer profitability, adding “some mines are starting to become uneconomical”.
It is not clear, at this stage, to what extent the current production cuts will affect the 2018 output total or export volumes over the winter months.
But the world’s leading supplier of thermal coal increased exports by 11% in the first three quarters of the year, to 315.8m tonnes, contributing to an excess of supply in the Pacific basin.
Too much supply
Indonesia has been plagued by oversupply since the government decided in August to revise up its 2018 production target by 5% to 510m tonnes.
At the same time major consumer China’s coal imports have been in steady decline since July, while India’s demand has remained modest.
China’s imports have fallen from a 2018 peak of 936,000t/day in July to just 744,000t/day in October, and the country has effectively banned imported coal for customs clearance until at least the end of the year.
In response, seaborne prices have dropped sharply, with the Asia-Pacific benchmark Global Coal Newcastle index last assessed down 6% on the week at USD 98.74/t. On Monday, it hit a seven-month low of USD 98.64/t.
Source: Laurence Walker/Montel
21 November 2018