Indonesia Govt to Set Up Benchmark Coal Price

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Friday, 08 October 2010 11:07

Theindonesiatoday.com -- In the past, coal suppliers and buyers have difficulties in determining coal price purchased from Indonesian market. Some international buyers used some popular coal price index as reference such as Newcastle Coal Index (ICI), Platts, etc. This situation encouraged the government to set benchmark coal price (Harga Patokan Batubara/HPB).

The Energy Ministry has issued Ministerial decree No. 17, Year 2010 on procedures of determining benchmark coal price, which has become effective since Sept. 23, 2010. In the future, coal suppliers and buyers must set coal price accountably based on the benchmark price.

The move was seen as important milestone as the benchmark coal price is expected to provide optimum price for domestic coal output.

The Mineral Resources and Energy Ministry said on its website that Indonesia has huge coal resources and reserves, reaching approximately 21 billion tons at present. Last year, Indonesia produced 254 million tons of coal.

“The benchmark coal price (HPB) is an achievement that could benefit both parties (buyers and sellers). Both producers and consumers or buyers will have a tool to help them in determining coal price in their contracts,” the ministry said in a statement.

This could also provide more transparency in the determination of coal price in any coal sales and supply contracts. In the past, it is often that coal price contracts are perceived to be too low or too high given the absence of benchmark coal price in domestic market.

The benchmark coal price will also help the government in calculating potential State Revenues.

“With the creation of benchmark coal price, the coal and mineral resources sale price will be much better, i.e. in tune with international price, therefore it will benefit producers and the government,” Witoro Soelarno, secretary of the Directorate General for Mineral, Coal and Geothermal at the Energy Ministry, was quoted by Kontan online as saying.

The HPB will be calculated using following steps. First, the government will determine Coal Price Reference (Harga Batubara Acuan or HPA) by averaging the calorie value of coal in four coal price indexes, namely, Newcastle Coal Index, Global Coal Index, Platts and Indonesia Coal Index (ICI).

The first two indexes represented international price, while the last two indexes represent local coal prices. Each coal category has a weight of 25 percent. The coal category will divided based on coal quality, which is set at 6,322 kkal/kg, moisture content at 8 percent, sulfur content of 0.8 percent, and ash content at 15 percent.

After determining the Coal Price Reference (HBA), the benchmark coal price (HPB) is then determined. There will be 8 benchmark prices category, representing the quality of the coal, starting from 4,200 up to 7,000 kkal/kg.

For that price of coal other than 8 classes of HPB, prices are determined by interpolation approaches or determining HPB based on a certain formula.

The HPA (or CPR) and HPB (or CPB) will be announced monthly by related government institution and published at www.djmbp.esdm.go.id. (roffie@theindonesiatoday.com)

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