Record-high coal prices have helped Indonesian miners post strong results in the first half of the year, giving rise to market optimism as economies around the world begin to reopen following the easing of COVID-19 restrictions.
Newcastle coal futures, the benchmark for thermal coal in the Asia-Pacific, was trading on Wednesday at US$177 per ton, just below a decade high reached a few days earlier, and up 267 percent from last year’s prices, according to financial markets platform Investing.com.
Indonesian mining companies posted stronger financial performances in the first half of 2021, including publicly listed PT Adaro Energy and state-owned PT Bukit Asam. Adaro Energy reported 9.6 percent year-on-year (yoy) growth in net profit to nearly $170 million, while Bukit Asam saw its net profit rise a whopping 38.01 percent yoy to Rp 1.77 trillion ($124.92 million).
“This is in part due to the success of the management in seizing the opportunity of surging [prices], be it Newcastle or the [Indonesian Coal Index 3], which reached the highest levels in 10 to 13 years,” Farida Thamrin, Bukit Asam’s director of finance and risk management, told an online press conference on Monday.
The prices of coal and other commodities have been on an upward trend as China and other countries reopen following pandemic lockdowns, leading to a surge in demand for many commodities.
Farida said Bukit Asam’s coal exports to China grew ninefold and exports to the Philippines fivefold in the first half of the year compared to a year earlier.
Publicly listed PT Bumi Resources, the country’s largest coal miner, booked nearly $1.9 million in net profit in the first six months of 2021, reversing a net loss of $86.1 million recorded a year earlier. Publicly listed PT Indika Energy also reversed its net loss to collect $12 million in net profit.
Rising prices have prompted miners to spur production, as seen in Bukit Asam’s 11 percent growth in annual output to 13.3 million tons. The company has already met 92 percent of this year’s sales target based on the contracts it had secured to date, according to Farida.
But not all miners have hiked production. Adaro Energy’s output fell 3 percent yoy to 26.49 million tons because of increased rainfall in May and June.
“What is important for us is to maintain mining operations [amid] challenges in the field such as [bad] weather, and we are also facing the pandemic,” said Adaro Energy finance director Lie Luckman. “By maintaining production, we hope to get results and very good profits this year.” Hendra Sinadia, executive director of the Indonesian Coal Mining Association (APBI), attributed the price surge to supply pressure from unusually heavy rain and non-optimal production due to limited heavy equipment. The trade spat between China and Australia had also limited the coal supply and thereby raised prices.
“With regard to short-term projections, prices are likely to stay [strong], but this is vulnerable to corrections going forward, especially if trade relations between China and Australia improve,” Hendra told The Jakarta Post by text message on Tuesday.
Praus Capital research head Alfred Nainggolan said miners had failed to boost production quickly after reducing production in response to the COVID-19 pandemic. But production was expected to rise next year, with Adaro Energy estimated to produce between 56 million and 57 million tons of coal.
“The impact [on financial performance] is not significant because publicly listed coal companies, including Adaro Energy, have benefited from the significant increase in the average selling price this year,” Alfred told the Post by text message on Tuesday.