Coal is the most important energy source for electricity generation and also forms an essential fuel for the production of steel and cement. The Indonesia coal market is expected to grow at a CAGR of more than 5.8% during 2020 - 2025. Factors such as an increase in demand for electricity, supportive government regulations, and the presence of large coal reserves are driving the growth of the coal market in Indonesia. However, shift to alternative sources of energy such as natural gas and renewables for power generation, environmental impacts of coal, and effect of COVID-19 on coal exports and imports are likely to restrain the growth of the Indonesia coal market during the forecast period.
- Demand for sub-Bituminous coal is expected to drive the Indonesia coal market during the forecast period.
- Stringent government rules to reduce greenhouse gas emissions is likely to expand the share of sub-bituminous and lignite coals, which in turn is likely to create an opportunity for the Indonesia coal market in the near future.
- Increasing coal demand from end-user industries is expected to drive the Indonesia coal market during the forecast period.
Key Market Trends
Demand for Sub-Bituminous Coal to Drive the market
- Regarding coal reserves, Indonesia holds 6th rank globally, containing about 39891 million tons of coal reserves based on 2019 statistics. As of 2019, 70% of Indonesia's total coal reserves consist of Anthracite and Bituminous coal, and the rest 30% consists of sub-bituminous coal and lignite.
- Power stations that burn coal for electricity only prefer to buy a fuel that is energy-efficient, cheap, and lower sulfur content as part of the strategy to reduce greenhouse gas emissions. Indonesian coal production is skewed towards lower energy and cheaper sub-bituminous coal.
- Indonesia's electricity generation rose to 279.1 TWh in 2019 and is expected to increase further in the coming years. Hence, sub-bituminous coal is expected to witness growth in power generation source in meeting the country's growing domestic electrification needs, as urbanization and a growing middle class have created the need for greater access to electricity across the group of islands.
- However, Indonesian coal miners have decided to cut domestic production by 50 million tons in 2020 in their bid to increase global coal prices, which have been falling due to the effect of COVID-19.
Increase in Coal Demand to Drive the Market
- Indonesia is a nation rich in natural resources and with increasing energy demand to fuel the country's continued economic growth.
- Indonesia is one of the world's largest producers and exporters of coal, having produced 616 million tons of coal in 2019 and exported about 455 million tons, of which thermal coal accounted for 428.8 million tons in 2019.
- Indonesia's strategic geographical position towards the giant emerging markets of China and India created a huge demand for low-quality coal from these two countries as many new coal-fired power plants have been built to supply electricity to their immense populations.
- Coal is the dominating force in power generation. Coal is responsible for about 63% of Indonesian electricity production in 2019. This is due to coal's abundance, its relatively easy and low-cost extraction, and less expensive infrastructure requirements compared to other energy resources.
- Indonesia's coal consumption hit a historical maximum in 2019 at 115 mtce. Hence, this increase in coal demand is likely to drive the market growth over the forecast period.
The Indonesia coal market is fragmented. Some of the major players in the market include PT Adaro Energy Tbk, PT Bumi Resources Tbk, PT Indo Tambangraya Megah, PT Bukit Asam Tbk, and PT Bayan Resources Tbk.
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