“The rain season has come a couple of weeks earlier than usual and we’re barely making out monthly production target,” said a source at Bumi Resources, which produces about a third of Indonesia’s total thermal coal output through its subsidiaries PT Kaltim Prima and PT Arutmin. “We’re getting by on a hand-to-mouth basis. I’d say the situation is quite critical,” the source said.

Kaltim Prima and Arutmin produce high quality bituminous coal and have a combined output of about 4.8 million tons a month, which is mainly exported to Japan, Taiwan, Korea and India.

The source at Bumi said the firm was currently meeting its sales commitment by diverting its European shipments to the Pacific market. Bumi, Indonesia’s largest coal producer, said in August its coal output this year may reach its target of about 58 million tons if weather conditions were favorable.

PT Adaro, Indonesia’s third-largest coal producer, was still meeting its monthly production target but heavy rains have hampered expansion plans, a second source said.

“We would have liked to push out more coal for the rest of 2007 since prices are so high, but it looks like the expansion can only come in the first quarter of 2008,” said a source at Adaro, which mainly produces sub-bituminous coal.

Extended rainfall in July and August this year has already forced companies including Thailand’s Banpu and Straits Asia Resources Ltd. to declare force majeure on contracted shipments from their mines in south Kalimantan — causing coal prices to jump.

Analysts said falling Indonesian exports would further tighten the Pacific coal market, which was already experiencing a supply squeeze caused by surging demand from Asian utilities as well as export cuts in Australia.

Australian thermal coal prices on the globalCOAL index, a benchmark for Asian coal prices, have jumped about 35 percent since the start of the year to hover around a record US$85 a ton due to supply concerns.

Indonesia’s thermal coal output is likely to rise to about 180-185 million tons in 2008, up 9 percent from an estimated 170 million tons this year, the Indonesian Coal Society said in late October.

Subscribe to The China Post and save.  Click hereSharePrintEmail

Write a Comment

Enter your comments - 800 characters max

Receive China Post promos

Respond to this email