Amid declining global demand for coal, Indonesia is still seeing a gradual rise in domestic consumption for the commodity, driven mainly by the operation of new steam-fueled power plants and higher demand from the cement industry.
Data from the Energy and Mineral Resources Ministry shows that domestic consumption from January to June experienced an 8 percent year-on-year increase to 25.52 million tons from 23.58 million tons.
While domestic consumption has increased slightly, exports dropped by around 32 percent to 80.22 million tons in the January-June period due to lower demand from major importers such as China and India.
“Most of the domestic consumption increase was due to the electricity sector. For example, the Celukan Bawang power plant and the Cilacap power plant, which have been expanded recently,” ministry spokesman Sujatmiko said on Wednesday.
Bali’s Celukan Bawang power plant and Central Java’s Cilacap power plant have power generation capacities of 426 megawatts (MW) and 660 MW, respectively.
Sujatmiko also noted that coal demand from the cement industry had also increased due to the many domestic infrastructure projects currently taking place.
Semen Indonesia (SI) corporate secretary Agung Wiharto claimed that the state-run cement company’s coal consumption was unlikely to increase this year as there were no planned expansions. However, he acknowledged that many other companies had started operating new cement factories this year, which might have contributed to the increased demand from the industry.
Fellow cement company Semen Merah Putih will soon start operating a new cement factory in Bayah, Banten with a clinker production capacity of 10,000 tons per day.
However, Agung noted that two cement factories belonging to SI would start operating next year, leading to an increased need for coal.
“Next year, our Rembang and Indarung VI factories will start operating and we will need more coal,” he told The Jakarta Post.
Last year, SI consumed up to 4.5 to 5 million tons of coal and the company is expected to consume around the same amount this year. However, Agung said that the company was expected to consume around 5.5 million tons of coal next year.
The declining global consumption of the most polluting fuel has been partly driven by China’s battle against pollution, economic reforms and its efforts to promote renewable energy.
The lower global demand has caused coal prices to remain low. Reuters noted that Australia’s Newcastle coal price, an Asian benchmark, had risen to a 2016 high of US$58.70 per ton this month. Meanwhile, Indonesia’s coal reference price (HBA) also rose to $53 per ton this month.
Separately, Indonesian Coal Mining Association (APBI) deputy director Hendra Sinadia told the Post that though domestic consumption was still low compared to exports, domestic demand was increasing every year due to economic growth.
He noted that the government’s 35,000 MW electricity procurement program was one of the factors boosting coal consumption. Up to 19,813 MW of electricity in the project is expected to be generated by steam-fueled power plants by 2019.
“Around 90 percent of all domestic consumption still goes to steam-fueled power plants while the remaining 10 percent goes to our industries, including the cement industry,” Hendra said.
The government has also been pushing for the construction of more smelters in order to develop the downstream mining industry. The increase of smelters is also expected to boost demand for coal, Hendra explained.
The most recent 2016-2025 electricity procurement business plan (RUPTL) projects for coal-fueled power plants to still make up the majority of electricity generation at 50.3 percent.