Indonesia launches a new formula for the HBA coal reference price
Indonesia’s Ministry of Energy and Resources (ESDM) has introduced significant changes to the guidelines for determining the benchmark price applicable for Indonesian coal producers.
The Harga Batubara Acuan (HBA) reference price has been in force since 2011 and has been the basis for determining pricing of 77 Indonesian coal brands and is also used to determine the coal royalties applicable.
A driver for changes to the HBA formula has been the disparity between prices for Indonesia’s lower grade coals (less than 5000 kcal/kg GAR) and international coal indices such as the globalCOAL Newcastle Index (GCNC) which is based on coal quality equivalent to 6322 kcal/kg GAR. Indonesian producers have argued that the royalties paid relative to actual prices received for lower calorific coal sales during 2022 was unsustainable.
The coal sector and government engaged in meaningful dialogue resulting in an updated HBA formula which now incorporates 70% of the average selling price of coal from the previous month and 30% of the average selling price from two months prior. Furthermore, there are now three distinct HBA reference prices for coal which are outlined below.
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