Indonesia's energy ministry (ESDM) has set the country's coal production target at 694mn t for 2023, around 5pc higher than the 2022 target of 663mn t, which has been exceeded.

 

Indonesia produced 668.75mn t in the year to 27 December 2022, exceeding the year's target, according to the latest ESDM data. Actual output during the period is likely to have been higher as some producers do not report their production volumes promptly.

 

Indonesian coal production has recovered strongly after the ESDM imposed a month-long blanket ban on exports in January 2022 because of a domestic supply crunch. Production rose despite sporadic disruptions from rain throughout the year, and despite a shortage of heavy machinery. Indonesian producers have been keen to raise output wherever possible to take advantage of relatively high prices, which have been supported by weather-related supply disruptions to output in other producing countries such as Australia, and a post-pandemic recovery in demand.

 

The higher output target for 2023 is based on the approved work plan and budgets submitted by coal producers, the ESDM said. A number of Indonesian producers tried to increase their coal production in the middle of 2022 but several factors constrained plans to significantly raise output, including the higher rainfall, the heavy equipment shortage, and the January export ban.

 

Higher demand projections

The higher output target is also expected to address an increase in domestic coal demand. Jakarta has set the 2023 domestic market obligation (DMO) quota at 25pc of coal producers' output and the national DMO target at 173.5mn t. But the ESDM has said that it expects domestic coal demand to surpass this and has projected that coal consumption by the power sector alone — which accounts for almost 80pc of domestic coal consumption — is expected to reach 161mn t. The ESDM has said that it will closely monitor domestic coal sales to ensure that local industries will not experience supply shortages.

 

Under Indonesia's coal DMO policy, domestic producers must make a percentage of their annual output available to the domestic market or face sanctions.

 

Indonesian coal producers are also expecting seaborne demand to remain strong in 2023, fuelled mainly by a shift to coal among European utilities because of tight natural gas supplies and high prices. 

 

The ESDM has declined to comment on the projected total sales volume for 2023, but previously said that Indonesia's 2022 sales to Europe are expected to reach historical highs. Total Indonesian coal shipments to Europe in January-November 2022 stood at 5.9mn t, the ESDM said in December.

 

India's thermal coal imports rose by 2.12mn t on the year to 12.88mn t, higher on the year for the sixth consecutive month, according to data from ship broker GAC. India is the world's second-largest coal importer.