Indonesia's energy ministry (ESDM) is continuing to study the possibility of revising the formula currently used to calculate the country's coal HBA reference price, with it aiming to have a new method in place before the end of this year.
The plan to update the current HBA formula followed concerns among Indonesian suppliers after a decoupling in the price of high-calorific value (CV) Australian coal compared with other grades and origins for much of last year.
The HBA is based on GAR 6,322 kcal/kg coal with 8pc total moisture, 0.8pc total sulphur and 15pc ash. It is calculated based on the average of four coal price indexes — the Indonesian Coal Index, Newcastle Export Index, GlobalCoal Newcastle Index and Platts 5900 index — in the previous month. It consequently tracks physical high-CV Australian and Indonesian prices closely.
Australian NAR 6,000 kcal/kg prices were assessed at $400.25/t fob Newcastle by Argus at the end of 2022, around 130pc higher than at the start of the year, although the market has since softened. Indonesian GAR 6,500 kcal/kg prices were assessed at $235.73/t fob Kalimantan at the end of 2022, up by around 60pc compared with the start of last year.
The HBA is used to set the prices of different Indonesian coal products, as well as the amount of royalties that companies need to pay to the Indonesian government before they are allowed to export their coal. The disparity between the prices of Australian coal and lower CV Indonesian material for much of last year negatively affected the amount of royalties that Indonesian producers had to pay relative to actual prices received for lower CV coal sales, prompting widespread calls for the HBA revision.
The Indonesian coal mining association (APBI) has requested that the ESDM increase the weighting of indexes that are more closely linked to Indonesian coal, such as the ICI index that is jointly published by Argus. These indexes are more representative of actual prices of Indonesian coal in the seaborne market, the APBI said. Indexes for Australian coal that have different specifications and prices that can be driven by different fundamental factors, the APBI said. A higher share of Indonesian-priced indexes in the HBA formula will be more representative of Indonesian coal market conditions while still retaining the pricing effect Australian coal has on the international market, the APBI added.
The ESDM said that it has no firm plans to the percentages yet and noted that the study is still in its early phase. It added that an ideal outcome would be for a HBA pricing formula that strikes a middle ground between state revenue generation from royalty collections and a reference price that reflects the actual price of Indonesian coal in the international market. Changes to the existing formula are likely to be made and ratified by the end of this year, the ESDM said.
