Overview of the Indonesian Coal Mining Industry
The coal mining industry in Indonesia is dependent on the world coal market. Global economic development influences Indonesia’s coal export as does the economic development in Japan, Korea, Taiwan, China and India, who are the main purchasers of Indonesian coal. At an international level, globalisation and development of regional trading blocks, such as in the ASEAN and APEC regions, is creating new opportunities for the Indonesian coal-mining industry to become competitive internationally.
Indonesia’s proximity to these markets allows for lower transportation costs and increased competitiveness.
Indonesia’s coal is produced by low-cost, open-pit mining methods. Coal mining has developed over the past 25 years with considerable growth in production and coal sales. Coal production increased from a mere two million tonnes in 1985 to over 155 million tonnes in 2005. In 2005 Indonesia exported more than 106 million tonnes of coal to Asia, Europe and America compared with about 65 million tonnes in 2001. Most of Indonesia’s coal-producing companies are located on the islands of Kalimantan and Sumatra, while the majority of domestic consumers are located on the island of Java.
Coal Resources and Reserves in Indonesia
Kalimantan has 55.0% of the known coal deposits and Sumatra has 45%. Of these deposits 33.8 billion tonnes are inferred resources, 12.2 billion tonnes are indicated and 10.8 billion tonnes are measured resources. Of the total 60.8 billion tonnes coal deposits approximately seven billion tonnes have been identified as commercially exploitable or minable reserves. Assuming an average coal production of 155 million tonnes a year, the seven billion tonnes minable deposits will last for 45 years. This is compared to the estimate that crude oil reserves will be exhausted in 15 years.
Of the seven billion tonnes minable coal reserves in Indonesia, 4.2 billion tonnes (or 60.8%) are found in Kalimantan and 2.7 billion tonnes (or 39.2%) are in Sumatra.
Coal is a natural resource mined in many countries around the world and is broadly classified as thermal coal or metallurgical coal. Thermal coal is also referred to as steaming coal and is used in the combustion process to produce steam for generating electricity and heat. Metallurgical coal or coking coal is principally used as a reductant in the blast furnace and steel-making processes.
The continuing growth in thermal coal exports from Indonesia underlines the sound market for Indonesian thermal coal. The thermal coal produced from the East Kalimantan area tends to be high-energy coal, with a high-ash content whereas coal produced from the South Sumatra area tends to be low to medium energy with a lower ash content. Coal produced from the South Sulawesi area tends to be medium energy with a low-ash content.
The intrinsic value of low energy, volatile thermal coal is being realised through its use in blends with more volatile and less expensive sub-bituminous coals. Potential exists for low volatile thermal coal to be sold domestically and/or blended at the mine and port for export.
Indonesia exported around 106 million tonnes of coal in 2005 and has become the world’s largest exporter of thermal coal. Nearly 80% of coal production is rated as sub-bituminous and has a niche position in domestic and international markets where demand for environmentally friendly, low ash, sulphur, and nitrogen thermal coal is on the rise.