By James Wellstead — Exclusive to Coal Investing News
Indonesian coal producer Bayan Resources (OTC Pink: BYRSF) is projecting that in 2012 production will come in between 18 and 20 MT, up from 15.5 MT in 2011, while Indonesia's largest coal producer, Bumi Resources (OTC Pink: PBMRF), plans to produce between 80 and 85 MT of thermal coal internationally, up from 66 MT the year before.Strong growth rates and continued untapped coal resources have provided Indonesia's government with the certainty that it possesses the upper hand against international capital. “If [companies] don't want it, they can get out. We are very strong," Simon Sembiring, advisor to Indika Energy (OTC Pink: PDETY) and former director-general of the Indonesian mining department, told the Sydney Morning Herald. Sembiring also stated that companies have been lobbying the government to rescind the laws to avoid potentially losing the financial and technical capital of current or future international mining groups. Conversely, the importance of the mining sector, and coal in particular, to the Indonesian economy has some experts taking the other side of the bet. "The high economic importance of the mining sector to Indonesia's central and regional governments provides a strong incentive for the government to adopt reasonable regulations that do not materially dent the sector's performance or its attractiveness to investors," Standard & Poor's credit analyst Xavier Jean told Reuters this week. Standard & Poor's believes that it is quite likely that tariffs or royalty rates will be levied and increased on coal and ore exports, but suggests that an outright ban on exports is likely to be toned down or delayed. Coal prices sluggish Despite the meteoric growth of the coal sector in Indonesia, benchmark coal prices out of the world's largest thermal coal exporter hit 16-month lows last week. FOB Pinang 6150 6,200 kcal/kg thermal coal fell to US $100.85/MT, down 6.2 percent from March, while Platts reported that the FOB Kalimantan 5,900 kcal/kg 90-day spot price is steady at $90.25/MT. Weak industrial growth numbers out of China have kept coal trading lower in recent months, while competing excess supply from the US has kept prices trading lower on the spot market and negotiated contracts within the Asia-Pacific basin.