Meeting Review on Formulation of HBA & HPB (Low Calorie Coal)

Due to the price disparity’s occurrence that is significant enough for the calorie coal of below 4200, the disparity of calorie prices can be up to $20, and DJMB revealed that they will review the HPB for calories under 4200 while coal with 4200 calories and above will still refer to existing HPB formulations, then on February 27, 2019 a meeting in regards was held with the aim of conducting a review of the price formulation of HBA and HPB low calories. The meeting was led by Dodik Ariyanto (Kasubdit of production operations and coal marketing business supervision) representing the Director of Construction & Exploitation of Coal which was currently doing business trip outside the city. The meeting was a continuation of a meeting conducted on 22 February 2018 which was attended by companies that also produce high-calorie medium and low-calorie coal in addition to lower calories.

In the meeting, some companies deliver the conditions in the field where the price disparity that occurs in each company is changing. From the meeting, there are several important points that was delivered:

PT. A said that the coal they produce is coal with calories below 3000 GAR and it is true that the market price disparity is very low, HPB in February 2019 shows the number of 20.97 USD but the actual price they sell is 13.7 USD.

PT. B said that they have not produced coal with calories below 4200 but PT. B revealed that the HBA should be divided into 2 for the high calorie HBA and low calorie HBA.

PT. C and PT. D stated that these very unstable indexes depend on the supply of coal where demand & supply components of ICI-1 be considered too high

PT. E stated that the price formulation that is used were relevant but some are unfortunately not when used for the criteria of coal in Indonesia. Argus and Plats’ Indexes are still relevant. Meanwhile, the Newcastle index and Global Index, which generally refer to Australian-produced coal, are considered less relevant when applied to Indonesian coal. While the discussion between price formulation and related to royalty payment should be done simultaneously and cannot be partially.

Regarding the production restriction policy conducted by Ditjen Minerba against the IUP area is considered already appropriate because it is refereed to be able to suppress the oversupply market to potentially improve the coal prices.

The government is in a position that is not easy to formulate the HBA considering the potential impact on the decline of the royalty for the country. On the other hand, the disparity of price will be very disadvantage to those who work in the business as it believed to affect the company's financial condition.

At the end of the meeting, DJMB suggest to have another meeting with the companies associated with this. APBI-ICMA is advised to proactively accommodate the aspiration of low-calorie coal members to propose this HBA and HPB formulation. In addition to that, DJMB asks an input/opinion for companies that will convey their issues related to the formulation of HBA and HPB both formally or informally. In addition to that, related with the establishment of an HBA, DJMB is considering removing the HBA not only for once a month but can be weekly or 2 times a week so that the HBA set is approaching reality given that the HBA itself is a compilation of the average HBA per week.

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