By Antonio Delos Reyes

September 18, 2020 - Coal consumption by Indonesia's power sector this year is expected to edge lower from a year earlier and also fall short of earlier projections, as the country's Covid-19 lockdown weighs on electricity demand and generation.

Domestic coal consumption by power utilities this year is expected to be 95.6mn t, down from 97mn t in 2019, said Indonesian state-owned power generation and transmission firm PLN. The latest guidance is also down 12.2pc from its initial forecast of 108.87mn t for 2020. The power sector's coal consumption was 68.17mn t during January-August this year, up from 50.16mn t in the first half of the year.

The earlier projection for coal consumption was based on an expected increase in power demand this year. But this has remained almost flat with the Covid-19 lockdown. Electricity consumption during January-July edged 0.51pc higher from the same period last year, PLN said.

But coal consumption has edged up in the past two months with an easing of lockdown restrictions. Average coal demand rose to 9mn t/month in July and August from 8.36mn t/month during January-June.

PLN expects the country's coal consumption to remain relatively steady for the rest of the year.

DMO Obligation

Indonesia's overall sluggish coal demand will make it more difficult for coal mining companies to fulfil their domestic market obligation (DMO) for the year, said the country's energy ministry (ESDM).

Domestic coal consumption is expected to reach 125mn t this year, short of the original 155mn t because of the weaker demand from the power sector, the ESDM said. This included coal consumption by utilities, as well as industries including cement mills.

Electricity demand is expected to recover in the coming months, PLN said, although it is unlikely to reach pre-Covid-19 levels.

PLN forecasts that even in 2021 power sector total coal demand will only reach 98.01mn t versus an original prediction of 120.53mn t. It may reach 103.72mn t in 2022 but significantly lower than the projected 128.54mn t.

The country's mining association APBI in August asked the government to relax the country's DMO because of weaker domestic coal demand. The DMO system requires coal producers to make a percentage of their annual output, currently set at 25pc, available to the domestic market. The ministry did not immediately clarify if it planned to relax the DMO requirements this year.