Indonesia mulls penalty for coal miners not meeting domestic obligation: sources

Indonesia is mulling penalties on coal miners who failed to meet their domestic market obligation, or DMO, in 2021, besides tightening export rules as part of its efforts to ensure sufficient supply within the country, sources said Jan. 19.

While sanctions may be imposed on producers who failed to meet 25% of their DMO, others may be subjected to penalty which will be decided by the government, according to a document seen by S&P Global Platts.

Those who have not fulfilled 100% of DMO will be subjected to penalty equivalent to the difference between the export price and that of the Harga Batubara Acuan, or HBA, price of $70/mt FOB, which is likely to be in the range of $10-$12/mt, according to the document.

The technical guidelines for these penalties will be ratified in the week ending Jan. 28, the note added.

Miners have an obligation to supply 25% of their annual production to the domestic market at a maximum price of $70/mt FOB.

Among others, Indonesia is considering evaluating DMO on a monthly basis compared to annually earlier, which will likely lead to miners complying with the domestic supply requirements every month.

"Earlier, companies that fell short of monthly DMO targets would try and postpone it for rest of the year so this new rule would help improve things," an Indonesia-based producer said.

Indonesia banned coal exports Jan. 1 after state-owned power company Perusahaan Listrik Negara, or PLN, reported critically-low coal stocks at power plants. The country has since then permitted some loaded vessels to sail after reviewing the DMO of the owners.

"Miners will also have to mindful of the fact that once exports start, they still have to keep fulfilling their DMO, so not all coal can be exported," an Indonesia-based trader said.

According to the note, the blanket ban on exports remains effective and will be revoked in stages.

Meanwhile, offers for thermal coal from other origin continued to scale north as export ban in Indonesia remains in place, resulting in lack of offers and bids. Sellers in Indonesia remain unsure of price movement when the ban gets lifted.

While some sources believe prices of Indonesian coal will rise once the ban gets lifted given expected supply tightness, others expect prices to ease amid China's strong domestic production and as Indian buyers stay silent.

Prices for Indonesia's 4,200 kcal/kg GAR have risen by $3.20/mt from Dec. 31 to $66.65/mt as on Jan. 18, according to Platts data. The tightness of coal supply in Asia has also boosted price of Australia's 5,500 kcal/kg NAR by $31.55/mt to $135.05/mt over the same period.