Launching lCl-4 (4200 Kcal/Kg GAR) for Anticipating LRC Market 

 

PT Coalindo energy has existed for almost two years since its establishment as a supporting company to coal Industries on both national and global scales. The company, which handles the Indonesia Coal price Index (lCI), is getting popular and making up its mind to embrace more subscribers.

 

As called on by various coal shareholders, PT Coalindo Energy was created on May 1, 2006. The company was established by a number of personnel at the APBI-ICMA (The Indonesian Coal Mining Association).

 

PT Coalindo Energy, whose representative office in Menara Kuningan located in an elite area of Kuningan in Jakarta, was established in response to the good prospect of lndonesia's export of coal as well as for domestic. Currently the price in market is high.

 

In the year 2003 Indonesia's coal export has been significantly increased to 85 million tons. In this year Indonesia's coal players under the APBI-ICMA started thinking to have their own index of prices. Previously, coal players in Indonesia referred to the price index set up by foreign companies like Barlow Jongker from Australia.

 

In year 2004 Indonesia was the world second largest thermal coal exporter at 92 million tons, after Australia at 107 million tons. With a big desire the personnel of the APBI-ICMA tried to fix a price index. The desire was greater when in year 2005 indonesia managed to exceed Australia in becoming the largest exporter of thermal coal at 112 million tons (Australia 107 million tons).

 

“We made up our mind to fix our own price index of coal. In year 2006 we took a quick step to establish a company that could handle the ICI'', said the Managing Director of PT Coalindo Energy, Maydin Sipayung, to Indonesian Coal in his office.

 

PT Coalindo Energy invited a world's reputable company i.e. the London-based Argus Media Limited, which has experiences for years in world's indexes. Argus was to handle international publication and marketing of the ICI in European market. Coalindo's objectives were to penetrate various markets, particularly in Asia-pacific region. It would regularly organize the ICI panel data.

 

What method is applied in determining the ICI price? The method applied by the PT Coalindo Energy is called a panel system of experts comprising three categories of groups: producers, buyers and supporters. Some of them will represent Asia-pacific market from countries of export destinations like Japan, Korea, Taiwan, Malaysia, the Philippines, India and Singapore. Indonesian experts will also be included in the panel.

 

“Experts from those countries are included in the panel. The experts have good understandings of coal global market. Experts have to have experiences for tens of years in coal marketing on both national and international scales. At least an expert has to be in a position of Senior Manager or Marketing Director of corporation. Expert has to be familiar with monitoring coal prices," said Sipayung.

 

The branch office of Argus in Singapore monitors coal prices in real market on the last days of the week. They collect data by phone, or from internet, yahoo messenger, and others.

 

Every Friday the panel-21 consisting of 8 producers, 8 buyers and 5 supporters-each panel comprises 8 overseas representatives-provides price data to Coalindo at 03.00 p.m. of WIB (Western Indonesian Time). In two hours Coalindo will process the data to set up prices from the highest to the lowest of three grades of coal i.e. ICI-1 of 6,500 Kcal/kg, ICl-2 of 5,800 Kcal/kg, and ICI-3 of 5,000 Kcal/kg. Ten percent of the highest prices and ten percent of the lowest prices will be removed to turn away biases from prices: the panel of producers tends to set up the highest price while the panel of buyers to the lowest one. At 05.00 WIB p.m. the already-processed data of ICI prices are sent to Argus in London.

 

At the same time the Singapore branch office of Argus will send price data of three grades of coal. Two sources of price data go to Argus in London. Argus then uses 50 percent of data from Indonesia and 50 percent of data from its Singapore branch. A final index of prices will be published by Argus. Afterwards in some hours the data will be sent to subscribers in Asia Pacific and European regions. The panel prices are for the publication of the next-week index. "In Indonesia we can access the data on Saturday morning," said Sipayung

 

Gradual Increase

 

After a launch in July 2006 in the first two months most of the ICI subscribers were players in coal sector of grades 2 and 3. Those of grade 1 of 6,500 Kcal/kg continued to refer to price index by Barlow Jonker or to other overseas indexes. After three months said Sipayung, coal players of grade 1 began to join the ICI.

 

“The ICI is more favorable because any subscriber is provided with the index of several prices. This is why when we contacted new players in coal sector they directly placed subscriptions on us,'' said Sipayung.

 

Sipayung was proud of his company because in the last two years the number of ICI subscribers had been very promising. The subscribers to the ICI are those from companies in ten countries i.e. the United Kingdom, Australia, Japan, Taiwan, Thailand, India, Malaysia, Singapore, China (including Hong Kong) and Indonesia. The composition of subscribers is: 66 percent of Indonesia, 14 percent of India, 4 percent of China/Hongkong, 5 percent of Thailand, 3 percent of Japan, 3 percent of the United Kingdom and the rest from other countries.

 

''The growing number of subscribers has so far been significant, particularly from India. India is rigorous in developing power plants of low-rank coal," explained Sipayung, adding, "I’m sure the ICI, which is committed to being independent, is much sought by people. When the ICI is a bit be lated in sending data due to troubling network, many subscribers become uneasy and contact us for data. It means that now they need us''

 

The ICI does provide solutions. Subscribers can refer to the coal price index when they have to deal with sales and purchases of coal. Indonesian government has also referred to the lCI data in determining the price of coal in mining royalties. Last year PT PLN applied a combination of the ICI data, rate of exchange and fluctuating price of oil-based fuel (BBM) at ratio of 50:40:10. The ratio was used as a barometer of coal prices for the PLN's coal-fired power plant (PLTU).

 

The ICI motto is: ''The ICI provides the best services”. With the motto the personnel of the ICI tried to make the year 2008 become a year of improving services to subscribers. Together with the ICI, PT Coalindo Energy publishes a complementary media i.e. CoalindoNews-an extra service to subscribers.

 

CoalindoNews comprises brief news on coal mining, marketing, latest prices of national and international markets, government's policies in mining sector and activities in energy sector   related to coal. "To accommodate more aspirations from subscribers, CoalindoNews will be published twice a week," said Sipayung, who is in charge of content of news and issues.

 

When Maydin Sipayung targeted a double growth of subscribers in year 2008, the target seemed to be achievable. Its segment of market is open wide. It is important to know that last year the ICI's subscribers grew 30 percent above the target.

 

Launch of Index of Low Rank Coal

 

In satisfying subscribers due to growing demand for low rank coal, particularly the coal to supply the government's 10,000-MW project, Argus/coalindo will launch the ICI-4 (4200 kcal) next June.

 

From observation in several months, 23 nominees have been selected for the membership of the panel from various companies, which produce low-rank coal.

 

Soon, Argus/coalindo will publish 4 indexes i.e. ICI-1 of 6500 kcal; ICI-2 of 5800 kcal; ICl-3 of 5000 kcal, and ICI-4 of 4200 kcal. The inclusion of ICI-4 will help Indonesia’s coal players determine a better reference of coal prices in national and international markets.

 

The index can actually be applied in determining the price of coal to the PLN's PLTUS as well as other consumer domestically or internationally in the upcoming period.