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License row holds up Indonesia's coal

by Staff Writers
Jakarta (UPI) Feb 2, 2011
The Indonesian government has blocked shipments of at least 3.5 million tons of coal since Jan. 15 because of trading permit delays, an industry group said Tuesday.

The license snarl threatens the country's coal exports and could result in skyrocketing coal prices, said the Indonesian Coal Mining Association, The Jakarta Globe reports.

Bob Kamandanu, head of the association, known as APBI, said coal traders submitted applications for new licenses three months ago, in compliance with the country's 2009 mining law, but they have yet to be signed by the energy minister.

Companies that ship coal or other mining products are recognized as traders by the Indonesian government.

"Approximately 3.5 million tons of coal are stuck in stockpiles," said Kamandanu.

Coal from a mining site is typically moved to a stockpile near a port where it is then loaded on a coal freighter. As a result of the licensing holdup, Kamandanu said, about 70 ships are waiting to be loaded.

"The pending chain will affect coal miners' production," he said. "Miners won't dig the coal if the stockpiles are still full."

Indonesia is the world's third largest coal exporter after Australia and China.

Kamandanu said APBI filed a complaint with the energy ministry Tuesday over the dispute and Indonesian coal companies have alerted buyers to the shipment delay, citing force majeure, a legal clause allowing producers to miss deliveries because of circumstances beyond their control.

Kamandanu warned that the backlog in shipments could spark a surge in international coal prices, already under pressure in the wake of floods in Australia, the world's largest exporter of coal.

In a Jan. 20 report, Societe Generale said that coal prices in Newcastle, Australia, could rise 34 percent on average this year.

Indonesia's permit issue could also hurt investment in the country's coal sector.

"It will create a negative impression for coal mining investors in the future," APBI Executive Director Supriatna Suhala said last week.

In November, global financier Nathaniel Rothschild paid $3 billion for stakes in two of the country's largest coal mining companies, Bumi Resources and Berau Coal.

APBI had said in November that coal production in the country could reach 340 million tons this year, if rainfall is normal. In 2010, coal production reached 300 million tons, 20 million tons below target due to an extended rainy season.

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