Coal Prices are Exorbitantly Exorbitant, Beware of Dying PLN!

Jakarta, CNBC Indonesia – The price of coal is still exorbitantly high, although the price has dropped, it is still above US$ 200 per ton. This very high price makes coal entrepreneurs tend to be more export-oriented compared to meeting domestic needs, whose price is limited to a maximum of US$ 70 per ton.

This was conveyed by Energy Observer Widhyawan Prawiraatmadja to CNBC Indonesia, quoted Thursday (07/10/2021).

He assessed that the coal price policy for domestic or Domestic Market Obligation (DMO) which is currently limited to a maximum of US$ 70 per ton, does indeed protect PLN from the “crazy” surge in coal prices at this time.

“In terms of coal, PLN buys at a capped price of a maximum of US$ 70/ton, so it is somewhat protected,” he told CNBC Indonesia, Thursday (07/10/2021).

But on the other hand, the huge price difference between DMO and foreign markets, according to him, will make coal entrepreneurs tend to choose exports and reduce their supply to PLN.

“But the danger is that coal mining entrepreneurs will tend to export and reduce supply to PLN,” he continued.

In addition to coal, the increase in gas and fuel oil (BBM) prices can also have an impact on PLN. Expensive gas and fuel prices make electricity production costs more expensive, while tariffs have been regulated by the government and cannot be adjusted arbitrarily by PLN.

“PLN will also be increasingly short-sighted because it has to pay for gas and fuel which is more expensive, while electricity rates cannot be adjusted,” he continued.

Previously, the Director of Corporate Planning of PT PLN (Persero) Evy Haryadi also expressed concern that coal entrepreneurs would export all of their supplies, and ignore the supply for domestic power plants.

Therefore, his party also asked for support from the coal industry to continue to meet the needs of coal for PLN power plants in the midst of the current surge in coal prices.

“Don’t let high prices go abroad, all of our coal is exported. But of course, domestically it will be prioritized,” he said in the 2021-2030 PLN RUPTL Dissemination Webinar, Tuesday (05/10/2021).

He said that whatever happens overseas, including the skyrocketing prices, domestic needs must first be met.

“There is a government policy to protect the interests of PLN and our domestic electricity interests and the interests of coal entrepreneurs,” he explained.

He further said that about the energy crisis in China and the high price of coal, it really depends on the government. The current high price of coal abroad has helped PLN with the coal DMO policy.

“How is Indonesia’s strategy related to the crisis in China with the high price of coal, actually this point depends a lot on the government because these things cannot be fully controlled by PLN like in 2021,” he said.

Please note, since the end of 2020 (year to date), coal prices have skyrocketed by 188.7%. Now the price has crossed US$ 200 per ton, even two days ago it was almost US$ 300 per ton, compared to the beginning of the year which was still in the range of US$ 80 per ton.

In yesterday’s trading, Wednesday (10/06/2021), the price of coal on the ICE Newcastle (Australia) market was recorded at US$ 236 per tonne, down 15.71% compared to the previous day which reached US$ 280 per ton. Even though it fell, the price still soared above US$ 200 per ton, the highest even since 2008.

In early August, PLN also experienced a coal supply crisis due to coal producers not fulfilling their commitments. The supply of coal for the PLN Steam Power Plant (PLTU) at that time was even less than 10 days.

As a result, this makes the company report to the government, in this case the Directorate General of Mineral and Coal (Minerba) of the Ministry of Energy and Mineral Resources. On August 7, 2021, the government finally imposed an export ban on 34 coal producers for not fulfilling their commitments to PLN.

Muhammad Wafid, Director of Mineral and Coal Receipts at the Directorate General of Mineral and Coal (Ditjen Minerba) of the Ministry of Energy and Mineral Resources, said that the decision to ban exports was due to the need to guarantee the availability of coal for power plants.

“Our concentration is to guarantee the availability of coal needs for PLN’s power plants, some of which are already critical. We don’t want there to be power outages because there is no coal supply,” he told CNBC Indonesia, Tuesday (10/08/2021).

“There are several critical PLTU conditions with availability

The Ministry of Energy and Mineral Resources has issued the Decree of the Minister of Energy and Mineral Resources No.139.K/HK.02/MEM.B/2021 concerning the Fulfillment of Domestic Coal Needs stipulated by the Minister of Energy and Mineral Resources Arifin Tasrif on August 4, 2021. In this regulation it is determined that the government requires coal producers to sell 25% of its planned annual total coal production for domestic needs.

The rules for selling coal into the country are intended to provide electricity for the public and private interests, as well as for raw materials or fuel for industry.

The selling price of coal for DMO is also set at a maximum of US$ 70 per ton.

In the fourth point of the ESDM Ministerial Decree, it is stated that there are sanctions if they do not fulfill the 25% DMO regulation or do not fulfill the sales contract, namely in the form of prohibiting the sale of coal abroad to fines and or compensation.

[Gambas:Video CNBC]

(wia)


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