OREANDA-NEWS. Indonesian coal production likely declined by around 14pc last year from 2014 to around 392mn t as mining firms reduced their output because of weak prices and sluggish demand, Indonesian Coal Mining Association chairman Pandu Sjahir said.

Last year's production was significantly below the initial target of 460mn t set at the start of 2015 by Indonesia's minerals authority, and also fell well short of a revised target of 425mn t.

The country's exports last year likely fell by around 23pc compared with 2014 to 295mn t because of lower demand from several key markets, notably China and India. And exports could fall by at least another 15pc to below 250mn t in 2016, Sjahir said.

One of the key reasons for the decline in exports last year was China's increased import tariffs and stricter coal quality regulations. Chinese coal imports fell to 204mn t last year, a 30pc slump from 2014.

Deliveries to India – historically another key destination for Indonesian coal – also fell because of rising domestic production and weaker-than-expected utilisation by coal-fired power plants. India's receipts of imported coal during April-December fell by 15pc compared with a year earlier to 132.3mn t, coal secretary Anil Swarup said earlier this month. In addition, slower-than-expected demand growth from Indonesian power generation firms has compounded weaker demand from China and India.

Jakarta is adding new generation capacity, which could soak up some of the coal oversupply that has helped push coal prices to their lowest levels in years. But capacity additions are not happening as quickly as hoped because of delays to power plant projects, some of which have been hit by land acquisition disputes, licensing delays and funding problems. Fob prices of GAR 4,200kcal/kg Indonesian coal declined by around 26pc last year and are currently at $26.41/t.

But Indonesian coal demand could increase by around 22pc from last year to as much as 110mn t in 2016 as new capacity is brought on line, Sjahir said.

The Indonesian government said last week it is aiming to invest $16.38bn in 2016 to support plans to boost the national electrification ratio to just over 90pc by the end of the year, up from 88pc in 2015, by bringing new generation capacity on line and improving the transmission network.