ICMA WEBSITES – EDITORIAL (07 SEPTEMBER 2020)
Coal Production Target 2021-2024, Is it Too Optimistic?
Coal production target for 2020-2024 is among agenda discussed in the recent closed-hearing (RDP) between the Commission VII and the Directorate General of Mineral and Coal (DGMC) on August 27. In the meeting, DGMC presented a quite optimitic coal production target for 2021-2024. In 2021, it is projected that the production will reach 609 million ton, while for 2022 – 2024 the coal production are targeted to reach 618, 625 and 628 million ton respectively. For this year 2020, despite the HBA hits the lowest level in a decade, the government is confident the 550 million target could be achieved. If we look at the current situation where the impact of the Pandemic Covid-19 is very severe to the demand, the above projection may be look to optimistic for some.
In making the above projection, it appears that the government assume the economic recovery post Covid-19 in 2021 could boost the coal demand significantly. That is why the 2021 production target is set 609 million ton or roughly 11% increase from the 2020 projected demand. Although it looks higher but in fact, the 2021 target is lower than the actual production in 2019 which was 616 million ton, the record high. The optimistic view is driven by the assumption that the economic recovery in China and India would trigger more demand. But actually it is too early to predict that the appetite for coal impor in the two countries would be similar as in the 2019.
The government’s projection also use the assumption that the domestic demand will rise significantly in the next four years. For 2020, the domestic coal demand is targeted 155 million ton, of which the figure is remain unchanged despite the current domestic consumption until July 2020 is just half of the target. With the four months remaining, the domestic coal consumption is likely below the target. APBI has projected the figure around 120-125 million ton. If this is the case then the projected national production for the next four years sounds too optimistic. Perhaps, with global demand may not fully recovered in 2021, such higher production target may be seen as one of the negative sentiments which could affect the commodity prices.