Thermal coal output in Indonesia, the world's top exporter of the fuel, could be steady this year with 2011, at around 360 million tons, an industry group said on Tuesday, cutting its forecast as a global oversupply puts pressure on the industry.
“We see we may not reach our target of 390 million to 400 million tonnes, and the chances are it will be the same as last year,” Supriatna Suhala, executive director of the Indonesian Coal Mining Association, told Reuters.
Indonesia is the top supplier of thermal coal to China, its main market, but a slowdown in the Chinese economy coupled with increasing output from Chinese hydropower stations has led to declining demand for power station fuel from the world's second-largest economy.
Chinese traders scrapped import deals for at least 2 million tonnes of coal in July, with coal stockpiles already full at Chinese ports and cargoes waiting to offload.
“I hear that a lot of coal has been rejected. They have requested delaying shipments. There are also many cases where they cannot offload because ports are already full,” Suhala said, adding that smaller operations with high stripping ratios had been forced to close because operations were no longer profitable.
“If prices go below $70 per ton, companies with stripping ratios above 10 begin to get hit. Still, we are in a better position than Australia or South Africa,” he said, explaining that Indonesian coal mines benefited from being close to cheap river transport and seaports. “That's our competitive advantage.”
The excess supply has also hammered thermal coal prices in recent months. Australian thermal coal on the global COAL Newcastle index, the benchmark for Asian coal, closed at $88.41 on Friday, after prices plummeted from above $125 ton in the first quarter of 2011.
“The biggest problem is oversupply, because the United States has started pouring their production into East Asia, to Japan, Korea and Taiwan. And also Canada has started exporting,” Suhala said.