Coal KP owners will also have DMO obligation

Date Mar 2, 2010
Country Indonesia
Category Politics/General - Energy/Resources

The holder of KP (Mining Authoriziation) type of contract will also be
obliged to allocate a certain amount of their output to meet domestic demand
under the so-called domestic market obligation (DMO), Bisnis Indonesia
reported on Monday.

The newspaper quoted Bambang Gatot Aryono, Director General of Mineral, Coal
and Geothermal at the Ministry of Energy and Mineral Resources, as saying on
that the DMO obligation for the KP holder will be stipulated in a
ministerial decree.

KP contracts are issued by the regional governments, while the central
government issues another type of contract that is PKB2B, also known as Coal
Contract of Work. The Ministry issued the decree No. 34/2009 on Dec. 31,
2009 which impose DMO obligation on PKB2B holders.

"The DMO obligation is imposed on big KP holders, particularly those with
sustainable and huge production. Thus, there will be no discrimination,"
Bambang said.
Bambang said his office is inventorying around 8,000 KP holders which are
potentially liable to the DMO obligation.

"What is clear is that the DMO obligation will be imposed on large-scale KP
holders, such as (state owned) PT Tambang Batubara Bukit Asam) and PT Pinang
Coal Indonesia. We'll start calculating the percentage of production for DMO
this month and we expect the total amount (the amount of coal to be sold by
KP and PKB2B holders) will become known in July," he said.

Bambang also said the national coal production may reach 280 million tons
this year, up by 10-15 percent from the initial target of 250 million tons,
thanks to the recovery of coal price on the world market. China is expected
to purchase more coal this year, he explained.

The national coal output will continue to increase in the coming years as 15
companies plan to start construction this year, he said.
He said the ministry has made assumptions of coal output and domestic demand
through 2014.

The domestic coal demand is estimated at 93 million tons, while output is
projected to reach 280 million tons in 2011. The demand will increase to 95
million tons, while national output is expected to rise to 290 million tons.
In 2013, the domestic demand is projected at 95.9 million tons, while the
national output is estimated to stand at 297 million tons. In 2014, the
domestic demand is expected to increase to 110 million tons, while the
output is targeted to increase to 309 million tons.

News Source : March 01, 2010 / Petromindo.com

Newcastle sellers hold on to spot tons in lead up to Japan talks

Date Mar 3, 2010
Country Japan-Australia
Category Market - Energy/Resources

Asian coal buyers are considering offers for lower cv Indonesian thermal
coal at $72-$75/mt FOB on a 5,800 kcal/kg gross air dried basis in
preference to 6,300 kcal/kg GAR Australian thermal coal which was trading at
$94- $95/mt FOB Newcastle for prompt delivery cargoes this week.
Market participants said there had been very little buying interest from
Chinese coal buyers since the end of the Lunar New Year holiday on February
22.

"No sign from the Chinese yet -- I suspect it will take a few days for them
to settle back in from their vacation," said one market participant.
Commenting on buying interest from China a second market participant said;
"There isn't a lot yet, as it's only a few days since the Chinese New Year
finished."

Another market participant said that spot Newcastle prices were "too high"
for Chinese buyers. They may have turned their attention to Indonesian
thermal coal which was more competitive than Australian coal on an adjusted
calorific value basis.

He reported seeing significant buying interest for Indonesian 5,800 kcal/kg
GAR thermal coal though sellers wanted $72-$75/mt while buyers were willing
to pay only $69-$70/mt FOB.
"There is some buying interest for reasonable quantities of Indonesian coal
which is more competitive than Newcastle. Australian thermal coal is getting
support from high coking coal prices," the third market participant said.


An April delivery cargo of FOB Newcastle coal was bid on-screen at $92/mt
against an offer at $115/mt on globalCOAL during Asian trading hours
February 24. Later delivery cargoes were bid on-screen at $75/mt for Q2 and
$73/mt for Q3.
Australian thermal coal producers were in no apparent hurry to sell to spot
buyers given they are in the middle of price negotiations with Japanese
power utilities for annual contracts that start delivery on April 1.

There was an unconfirmed report February 24 that the contract talks had
started with Japanese utility Chubu Electric receiving an initial price
offer of $100/mt FOB Newcastle.

"Australian producers don't need to give price discounts by selling their
coal on the spot market.

Japanese coal buyers are good payers and fantastic counter parties," he
said.
He expected Newcastle spot prices to remain strong until Japan settled its
annual price contracts. "Then Australian producers will rush to place tons
of Newcastle coal with Korean and other buyers' tenders," he said. Wet
weather in Australia's coal producing regions over the past few weeks has
helped support Australian thermal coal prices, as has congestion at eastern
Australian coal ports, said market sources.

"There has been a lot of rain in Queensland and New South Wales which has
affected the market. And, there is a lot of backlog at Australian ports,"
said the second market participant. "Buyers have to wait for cargoes or else
search for cargoes at other ports," he said.

Xstrata's Rolleston thermal coal mine was expected to resume shipments from
Gladstone port in mid March after succumbing to flood water from heavy
rainfall. The open cast mine produces around 500,000 mt/month of export
coal.

Xstrata confirmed February 24, that its "force majeure remains in place" for
Rolleston.
"We are still going through the recovery process of removing water from the
pit," said a company spokesman by telephone. The discharge of floodwater
from mines is subject to strict environmental protocols in Queensland.
The Newcastle market's current tightness was expected to endure until April
or May, sources said.

News Source : Issue 960 / March 1, 2010 / Platts-International Coal Report -
copyright The McGraw Hill Companies