Jakarta Globe quoted energy and mineral resources ministry official as saying that falling international coal prices, bad weather and other problems cut Q1 coal output by 50% to 30 million tonnes against an initial government target of 60 million tonnes.

Mr Bambang Gatot Arioyono DG of coal, mineral and geothermal energy said that “Big coal companies including PT Bumi Resources as well as PT Adaro Energy, PT Berau Coal, PT Arutmin and PT Kaltim Prima Coal had been hampered significantly. Many smaller companies have also been badly hit by the currently unfavorable market conditions.”

He said that “The current price must be affected by demand. We are now urging producers to ramp up their production in the Q2.”

Ms Sylvia Darmaji a mining sector analyst at PT Ciptadana Securities said that “Although sales and production volumes may be up and even with slightly lower costs due to the lower fuel prices, I doubt that coal companies will see profit growth this year.”

Ms Sylvia said that lower coal prices would put more pressure on the profits of firms like Bumi, which prices its coal output every year as opposed to long term price lock-ins by firms like PT Indo Tambang Megahraya.

She said that “When the price is good, Bumi may reap hefty windfall profits but when prices decline, profits for firms like Indo Tambang are much more stable.”

Indonesia, the world’s second biggest coal exporter in 2007 after Australia, has been hit by falling export volumes and prices and declining domestic demand. Although the government initially predicted that domestic consumption would rise by nearly 30% from 52.57 million tonnes to 68.3 million in March excess coal supply skyrocketed, with PLN reporting excess coal supplies at 50 days, more than double the usual 20 day supply.

(Sourced from Jakarta Globe)