Indonesia’s coal production to grow by 2.6% in 2022 amid strong demand from Europe 

Indonesia is the world’s third-largest coal producer after China and India. After registering strong growth of 8.9% in 2021, Indonesia’s coal mine production is expected to register a 2.6% year-on-year (YOY) growth to reach 629.9Mt (million tonnes) in 2022. 

Due to the EU’s restriction on new coal imports from Russia, demand for coal grew from several EU nations such as Germany and Poland during the first half of 2022.

Furthermore, since September 2021, Russia has been blocking a significant amount of gas from reaching Europe. 

The European gas crisis caused a temporary increase in the use of coal for power generation. The Indonesian Government intends to raise coal output to 663Mt in 2022, notwithstanding the potential for more exports to satisfy the demands of European nations. According to the Ministry of Energy and Mineral Resources, until June 28, 2022, Indonesia’s coal production had reached 294.4Mt or 44.4% of the target. 

Additionally, Indonesian coal miners raised their output goal for 2022 in accordance with the government’s target. For instance, on May 12, 2022, PT Bumi Resources revealed its plans to produce around 89Mt of coal this year as opposed to 78.8Mt in 2021. Adaro Energy likewise revealed its plans to expand its 2022 output to 58–60Mt, while PT Bukit Asam wants to increase its output from 30Mt in 2021 to 37Mt in 2022. 

Over the forecast period, 2022–2026, Indonesia’s coal production is expected to remain flat at a combined annual growth rate of just 0.2% to reach 635.5Mt in 2026. Production will be impacted by the gradual closures of the Anggana project in 2023, Tunas Inti Abadi in 2024, Bunyu in 2025 and PT Samantaka Batubara and PT Karya Usaha Pertiwi projects, both of which are set to close in 2026. 

Overall, while short-term energy supply challenges are leading to increased demand for coal, the long-term transition towards renewable energy will negatively impact global coal production. Between 2022 and 2026, global coal production is expected to post a compound average annual growth rate of 1.3% to reach 8.6Bnt in 2026. 

In November 2021, a climate change summit – COP26 – was held in Glasgow as a global effort to phase out coal and cut emissions from the power sector, where 40 countries vowed to stop issuing permits and providing direct government backing for new coal-fired power stations. Many of the largest coal-producing nations, nevertheless, chose not to sign the agreement. 

While China, India, Russia and Australia disagreed on phasing out coal, the US is expected to decrease coal production in the coming years.

India, meanwhile, will be a key contributor to the growth, with its coal production expected to grow from 810.9Mt in 2021 to 1.2Bnt in 2026 as the country looks to minimise requirements for imported coal.