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Selling Price of Coal for the Cement and Fertilizer Industry

Price of Coal

Determination and Calculation of the Selling Price of Coal for the Cement and Fertilizer Industry from November 1, 2021, to March 31, 2022 – It’s USD 90 FOB Vessel

To ensure the fulfillment of coal needs as raw material/fuel for the domestic cement and fertilizer industry, the Minister of Energy and Mineral Resources (“MEMR”) issued MEMR Decree Number 206.K/HK.02/MEM.B/2021 regarding Selling Price of Coal to Meet the Need of Raw Material/Fuel for the Domestic Cement and Fertilizer Industry (“MEMR Decree 206/2021”).

The selling price of coal is valid from November 1, 2021 to March 31, 2022, as regulated under several provisions in MEMR Decree 206/2021, as follows:

The Selling Price of Coal

The Selling Price of Coal is set at USD 90 (ninety United States dollar) per metric ton Free On Board (FOB) Vessel (Harga Batubara Acuan – “Reference Coal Price”), with certain coal specifications below:

  • Calories 6,322 kcal/kg;
  • Total Moisture 8% (eight percent);
  • Total Sulphur 0.8% (zero point eight percent); and
  • Ash 15% (fifteen percent).

The Determination of Selling Price of Coal

The Determination of Selling Price of Coal is made under either of two (2) conditions.

  1. If the coal specifications are different from the specifications as referred to in number 1, and if the Reference Coal Price is more than or equal to USD 90 (ninety United States dollars) per metric ton Free On Board (FOB) Vessel, the selling price of coal is calculated using the coal price formula as mentioned in the Annexure Point A (2) of MEMR Decree 206/2021.
  2. If the coal specifications are different from the specifications as referred to in number 1, and if the Reference Coal Price is less than USD 90 (ninety United States dollars) per metric ton Free On Board (FOB) Vessel, the selling price of coal is calculated using the coal price formula as mentioned in the Point A (3) Annexure of MEMR Decree 206/2021.

The coal price formula consists of certain variables, as follows;

  • Calorific Value of Coal;
  • Coal Water Content;
  • Coal Sulphur Content; and
  • Coal Ash Content.

Read More: Carbon Tax Provisions

The Calculation of Selling Price of Coal

The Calculation of Selling Price of Coal is made in two (2) types of mechanisms:

  • Spot Mechanism: Reference Coal Price used in determining the selling price of coal with spot mechanism is as set out in a Ministerial Decree; and
  • Term Mechanism: Reference Coal Price used in determining the selling coal price with term mechanism is calculated according to the formula of 50% (fifty percent) of the Reference Coal Price at the signing date of the contract plus 30% (thirty percent) of the Reference Coal Price one (1) month before the signing date of the contract plus 20% (twenty percent) of the Reference Coal Price two (2) months before the signing date of the contract, and can be reviewed at least every three (3) months.

The Fulfilment of the Royalty and Production Fee Obligations

  • The royalty and production fee for the selling price of coal of more than or equal to USD 90 (ninety United States dollars) are calculated by multiplying the formula of tariff production fees/royalty with the sales volume and selling price of coal as set in the prevailing laws and regulations; and
  • The royalty and production fee for the selling price of coal of less than USD 90 (ninety United States dollars) are calculated by multiplying the formula of tariff production fees/royalty with the sales volume and either the selling price or the Reference Coal Price, one that is higher, as in accordance with the prevailing laws and regulations.