COALspot.com: Low coal demand and excess supplies sent Indonesian benchmark coal price further down in January 2016. HBA has slumped by 0.58% month over month and sent HBA to its lowest level since it's published.
The January 2016 HBA shed nearly 0.58% compared to December 2015 and 16.67% compared the same period last year.
The Director General of Mineral and Coal of Indonesia once again revised down Indonesian coal benchmark price this month. The Mineral and Coal department has declared January 2016 HBA at US$ 53.20 per ton for 6322 GAR power plant coal.
The January 2016 price reference for Indonesian coal decline 0.58% or US$ 0.31 a ton from the previous month. The January Indonesia benchmark price for coal was off 16.67% from the January 2015 price of US$ 63.84 a ton. An increase or decrease in four international coal indices such as ICI-1, Platts-5900, NEX and GC will cause an increase or decrease in HBA.
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According to the data from Director General shows that, the government has fixed US$ 13.15 a ton (decline 0.53 per cent month on month) for the coal with calorific value 2,995 kcal/kg on GAR with total moisture 50.10% on as received basis for January 2016 FOB vessel delivery. In the meantime, the government also declared US$ 38.97 per ton as HPB for 5000 GAR coal with total moisture 22.40%, Ash 8.90% and Sulphur 0.54% for January 2016 deliveries.
The January 2016 Indonesian thermal coal reference price (or called HBA) was the lowest in 85 months or since launching of HBA by the government of Indonesia in January 2009. The royalty and taxes will be calculated based on this declared HPB.
Indonesian coal benchmark price for January 2016 was calculated based on calorific value of 6,322 kcal/kg (GAR), stated to be using a formula based on the December 2015 index average of ICI-1 (Indonesia Coal Index) 25%, Platts-5900 25%, NEX (Newcastle Export Index) 25%, and GC (globalCoal Index) 25% and its was calculated considering coal with GCV (GAR) 6,322 kcal/kg, Total Moisture (arb) 8.00%, Total Sulphur 0.8% (arb), Ash Content 15 % (arb) and delivery free on Board (FOB) Vessel basis and apply to spot contract, delivery between 1 – 31 January 2016.
The highest benchmark price was declared by the Ministry of Energy & Mineral Resources of Indonesia in February 2011 and price was US$ 73.85 per ton or 138.81 per cent higher compared to this month's bench mark price.
The government of Indonesia was publishing a monthly coal price reference (HBA & HPB) since January 2009 to be used by coal producers for all spot and term contracts.
However, the official implementation of HBA was commenced since September 2011 and according to government regulation, the coal benchmark price must be used by the holders of production operation IUPs, special production operation IUP's, and CCoWs as a reference in determining the coal selling price for a particular period.
HBA of February 2011 was the highest since the launching of HBA by the government of Indonesia (US$ 127.05 / MT for 6322 GAR coal) and the lowest was declared in this month (US$ 53.51 / MT).
The declared HBA in this month is valid for the spot price (loading on or before 31 January 2016), while as for term price (up to 12 months supply), the average reference price (HPB) of the previous three months will be used to determine the selling price. (50% of the latest available month HPB (this month) 30% one month prior HPB and 20% of two-month prior HPB).
The government also declared price marker for eight brands of Indonesia's coal, which are most commonly traded in the market. Those eight brands act as the benchmark and used to calculate other 67 coal types with a quality similar to the coal price markers.
For sales in the barge, the reference price is reduced by barging and trans-shipment costs from the barge to the vessel. The government has recently issued a regulation (644.K/30/DJB/2013 dated 21 March 2013) to regulate or determine coal prices on FOB barge. The government also fixed the freight for barging, surveyor, insurance and etc., to determine FOB barge price. Transshipment cost US$ 4.00/MT + Surveyor cost US$ 0.25/MT + Insurance 0.80% per shipment + Barging cost (for 270 footer - (US$ 0.0221 X barging distance) + US$ 3.7406, for 270 - 330 footer - (US$ 0.0184 X barging distance) + US$ 3.1172 and > 330 footer - (US$ 0.0154 X barging distance) + US$ 2.6002.
The coal price reference is being established to fulfil the requirement of mining law 04/2009 and ministerial decree No.17/2010. In addition to that, it aims to increase government revenue from royalties from coal producers.
The excess of coal supplies and weak demand, fast developments of renewable energy and fall in oil prices are still to be blamed for obstacle of price recovery or the main reasons of falling of prices. According to small scale miners, the today’s price levels are no more supporting any new investments or new explorations in coal mines. Some Indonesian big scale miners are increasing the production to keep their bottom line healthy.
Indonesia, to increase state revenue from the mining sector, the Government has imposed a new final income tax on any sale of mineral and coal. The new income tax, i.e. Article 22 Income Tax, is regulated under Minister of Finance ("MOF") Regulation No. 107/PMK.010/2015 regarding the Collection of Withholding Tax in Connection with Payment for Delivery of Goods and Imports or Other Business Activities. The regulation came into force since August 8, 2015.
Article 22 Income Tax, at the rate of 1.5%, now applies to any sale, either domestic or export, of non-processed or non-refined minerals (metal, non-metal and stone) and coal.
Exporters must pay the income tax to the state treasury through a post office, foreign exchange bank or any bank appointed by the MOF. Evidence of payment will be verified by the Directorate General of Customs and Excise as a required supporting document for the export notification and will be used as a basis to issue an export clearance.
This income tax is only applicable to holders of a mining business license (Izin Usaha Pertambangan). It does not apply to holders of a Contract of Work (Kontrak Karya) or Coal Contract of Work (Perjanjian Kerjasama Pengusahaan Pertambangan Batubara), who are subject to different financial obligations under their respective contracts.
Ministry of Energy and Mineral Resources (ESDM) is also in process to revise methodology or mechanism to determine Indonesian Coal Price Reference (HBA). The new methodology is expected to complete soon. We expected the January 2016 HBA may based on new methodology. However the HBA declared by the Ministry of Energy and Mineral Resources in January 2016 still was using the old methodology and the same International indices as a basis.
Click here for full details of Indonesian coal price reference since January 2009.(cs).
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