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Indonesia Coal Cuts Hit Small Miners Hardest
4 Feb
Summary
- Large coal miners received full quota requests, burdening smaller firms.
- Indonesia aims to cut coal output by nearly a quarter to boost prices.
- Production cuts may cause layoffs and loan defaults for smaller companies.
Indonesia, the world's largest coal exporter, is implementing substantial production cuts, aiming for a nearly 25% reduction to approximately 600 million tons this year. This strategic move is intended to bolster flagging coal prices.
However, the burden of these cuts is not evenly distributed. Several of Indonesia's largest coal miners, including PT Bumi Resources, PT Adaro Andalan Indonesia, and PT Indika Energy, have reportedly been granted their complete quota requests. These major players hold special mining contracts (IUPKs) and pay higher royalties.
The Indonesian Coal Miners Association has warned that individual miners may face reductions of 40% to 70%, a level that could render some operations economically unviable. The industry is already grappling with increased scrutiny, including potential fines for permit breaches and a proposed export tax.
These challenging conditions pose a significant risk to smaller mining operations, which may lack the financial resilience to absorb the costs of reduced production. The coal sector is a vital employer, supporting an estimated 250,000 to 400,000 workers, primarily in Kalimantan and Sumatra.
