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IEEFA report: Can Indonesia’s coal industry survive COVID-19?

May 11, 2020

May 11, 2020 (IEEFA Indonesia) – A steep fall in coal prices as the COVID-19 pandemic spreads has raised questions about the cash flow viability of six out of 11 listed Indonesian coal producers, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

The IEEFA study of the 11 listed producers, Can the Indonesian Coal Industry Survive COVID‑19?, examines the issues of cash profit per tonne, a break-even coal price, cost control under pandemic conditions, and the risk to government royalty payments at the current coal price of $58 a tonne.

“From US$70/tonne in January, the Newcastle benchmark price has retreated to US$58/tonne,” says Ghee Peh, author of the report and an IEEFA financial analyst, “such a rapid fall in prices may not be an existential moment for the global coal industry, but it is a hard blow for Indonesia.”

“2019 was a solid year for Indonesia’s coal producers following an excellent 2018, thanks to the steady appreciation of benchmark coal prices,” says Ghee. “But the declines in 2020 were quite sudden and there has been no visibility on floor prices or a time frame for recovery. The sudden fall meant that managers were not in a position to proactively cut costs because the fall was not expected, even by as late as February 2020.”

IEEFA’s study analyzed the 11 companies using five key metrics, and found that Bumi Resources, ABM Investama and Geo Energy Resources would need a benchmark price of US$60-62/tonne to maintain cash breakeven.

“At current coal prices around US$60/tonne, and possibly lower, this would raise questions as to how  companies with higher costs would find the working capital needed to maintain operations,” says Ghee.

Indonesian coal producers’ price problems are compounded by a 13.5% royalty that the government collects on coal sales. Taking royalty payments into account, six of the 11 companies analyzed would be cash flow negative.

“At an average benchmark coal price of US$58/tonne for 2020, companies will face serious problems meeting royalty obligations, and this raises the question of whether the affected companies will seek a royalty moratorium,” says Ghee.

“And if one were to be implemented, it’s important to ask whether it will be applied to all companies or only to companies that face a negative cash flow per tonne of coal sold? If the royalty moratorium is expanded to the whole sector, then US$1.26bn of royalties could be at risk.”

Read the report: Can the Indonesian Coal Industry Survive COVID-19?

Media Contact: Amy Leiper ([email protected])

Author Contact: Ghee Peh ([email protected])


The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Ghee Peh

Ghee Peh is an Energy Finance Analyst with a focus on the Asian coal industry and South East Asia. Ghee has worked on major mining IPOs in Hong Kong and Indonesia including coal, copper and gold companies and has a deep interest in commodity markets. 

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