Indonesia's coal mining association APBI recently called coal companies to step up the fulfillment of Domestic Market Obligation (DMO) to ensure sufficient domestic supply.
APBI Executive Director Hendra Sinadia said coal producers who already signed sales contracts with domestic users should complete their sales as per the contract.
The DMO requires coal producers to sell 25% of their total planned output domestically. However, soaring export prices are making Indonesian coal producers prioritize global market instead of the domestic.
The Ministry of Energy and Mineral Resources (ESDM) issued thermal coal reference price, which is also known as Harga Batubara Acuan (HBA), at $100.33/t for June, an 89.37% rise from a year earlier.
The HBA is a monthly average price based 25% each on Platts Kalimantan 5,900 kcal/kg GAR assessment, Argus-Indonesia Coal Index 1 (6,500 Kcal/kg GAR), Newcastle Export Index (6,322 Kcal/kg GAR) and globalCOAL Newcastle (6,000 Kcal/kg NAR).
In contrast, the DMO price was no less than $70/t for domestic power producers.
The large price spread encouraged coal producers to prioritize exports rather than fulfilling the DMO, especially producers that didn't have direct contracts for DMO fulfillment, said chairman of Indonesian Mining Experts Association Rizal Kasli.
He also said a compensation fine should be urgently enforced to ensure sufficient domestic supply. "Otherwise, the national energy security will be disrupted and blackout may occur."
The ESDM is preparing to impose a compensatory fine on coal companies that don't fulfill their DMO this year. Provisions regarding guidelines for the imposition of compensation will be stipulated in a separate Ministerial Decree.
Last year, the ESDM decided to waive the compensation from miners for their shortfall in DMO sales, considering the difficulties mining companies faced due to the COVID-19 pandemic.
(Writing by Alex Guo Editing by Tammy Yang)
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