UPDATE 3-Indonesia eyes coal export curbs, tax
Mon, Jun 04 06:05 AM EDT
* Govt to curb exports to conserve coal for domestic use
* Indonesia still considering export tax for coal
* Move could hurt trade balance, investor sentiment-analyst
* Coal stocks slide, Bumi down 13 pct vs index down 4 pct
By Fayen Wong and Fergus Jensen
NUSA DUA, Indonesia, June 4 (Reuters) - Indonesia plans to curb coal
exports and is considering a tax on shipments of the mineral,
government officials said on Monday, pushing shares in the country's
leading coal miners down by more than 13 percent.
The world's top thermal coal exporter has introduced a series of
regulations aimed at squeezing extra state revenue from the mining
industry, including limiting foreign ownership and a 20 percent tax on
exports of unprocessed minerals.
But the government has so far steered clear of coal exports, worth $27 billion last year, or 13 percent of the country's total.
Any coal export curb is not likely to boost prices in the short-term
for a well supplied market, but could push up costs for the fuel in the
long run as it would force Indonesia's top coal buyers India and China
to seek alternatives.
"Indonesia is the biggest supplier of seaborne thermal coal, and if
everyone has to pay 20 percent more to get Indonesian tonnes, it will
have a real impact for sure," said Lachlan Shaw, commodities analyst at
Commonwealth Bank of Australia in Melbourne.
Energy and Minerals Minister Jero Wacik said on Monday the country
needed to conserve coal for domestic use, in a G20 economy seeing
strong growth and surging demand for power generation.
"Indonesia's need for coal will increase strongly, so exports will need
to be controlled," Wacik told the Coaltrans conference in Bali.
He gave no details on the scope or timeframe of any curbs.
The comments drove down shares in the country's top coal miners Bumi
Resources and Adaro Energy by over 13 percent, versus a 4.3 percent
drop in the broader Jakarta index.
Indonesia's coal demand is seen growing 10 percent next year to 63.2
million tonnes and then to about 68 million tonnes by 2014, state
utility PLN said on Monday. It forecasts consumption will surge to
125.7 million tonnes by 2022.
The former OPEC member is already reducing its liquefied natural gas exports because of higher domestic power demand.
Thamrin Sihite, a director general in the energy and minerals ministry,
said the country is still considering a tax on coal exports, while
another official at the ministry said it could impose a quota on
production and higher royalties.
"Royalties at the moment are too low," Edi Prasodjo, coal mining chief
at the ministry, told Reuters on the sidelines of the conference. "We
are still discussing the figures."
Indonesia already has a domestic supply obligation for coal, but miners
have so far been easily able to meet this and ship growing volumes each
year to meet regional demand, particularly to India where power
generation has surged.
"The key question is, if the government requires coal producers to set
aside a larger amount of tonnes for domestic consumption, can the coal
producers expand production faster than those domestic obligations? If
they can, exports will grow as well," said Shaw.
Indonesia has seen a boom in coal production in the past decade, and
output is forecast by the industry to reach 390 million tonnes this
year. But utility PLN said the government needs to start preserving
coal resources or they will run out.
"We are not the largest in coal reserves but we are the largest
exporter of thermal coal. If there is no new exploration, all our coal
resources will be finished in 40 years. Indonesia will have no more
coal for itself and no more coal left to export," said PLN's CEO Nur
Indonesia has coal reserves of 21 billion tonnes, accounting for around 3 pct of the world total.
Officials say new mining policies are aimed at helping the country
conserve its resources and increase state revenue, though they have
been criticised for creating uncertainty in the sector and hurting
Local governors in Kalimantan on Borneo island, the country's main coal
producing region, threatened earlier this month to shut down coal
exports if the central government did not supply it more subsidised
motor fuel, reflecting growing internal power struggles over the
country's resource wealth.
Analysts say moves to boost state revenues from the sector,
particularly from foreign investors, are designed to play to a domestic
audience ahead of national elections in 2014 and are a part of a
growing global trend of resource nationalism.
Wacik had a clear message to foreign investors at the conference. He
said the government welcomes foreign investment in the mining sector
but stressed the country's vast mineral resources will be prioritised
to meet domestic needs.
"Our priority is the welfare of the people," Wacik told the gathering of industry executives.
Southeast Asia's biggest economy imposed a rule earlier this year
requiring foreign companies to sell down stakes in mines and increase
domestic ownership to at least 51 percent by the 10th year of a mine's
Indonesia's move towards limiting mineral exports is adding to worries
by global investors already looking for safety in the dollar. The
country's rupiah currency, emerging Asia's worst performer so far this
year along with the Indian rupee, fell 1 percent on Monday.
"The policy would have adverse implications for trade, investment and
growth," said Jakarta-based political risk analyst Kevin O'Rourke in a
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