The mining industry in Indonesia has been facing several challenges in recent years, including a fluctuating commodity market, environmental concerns and the uncertainty of regulations, which could be inconsistent. However, two mining commodities will still shine in 2023: Coal and gold.
The Fitch Ratings expected the cash flow generation at Indonesian coal miners to “remain strong in 2023” based on its forecast for coal prices to remain strong, even as they moderate from unprecedented levels in 2022.
In general, the mining industry was able to survive and thrive in the midst of a COVID-19 pandemic and recession, said mining consultant firm PT Geo Mining Berkah Environment Engineer Desri Hanifah.
“The mining sector is still progressing. The more minerals that are exploited will become the basis of income for Indonesia,” she said on November 17, 2022.
According to Head of the Statistics Indonesia (BPS), Margo Yuwono, the mining industry will see a growth of 13.47%. The coal and lignite mining will see a raise of 9.41% which was led by the increasing demand for coal from abroad, and also a significant increase in coal prices. The mining of metal ore reached a growth of 9.03% due to the increasing copper and gold production as well as an increase of demand from abroad.
Coal production sees a significant growth
The coal mining industry is going to see a significant growth as industry players will increase production in 2023 due to the rising demand from China. Despite the recession threat, coal mining production is predicted to be fine and will not be as worse as during the early days of the COVID-19 pandemic.
However, there are several factors that will impact the production such as weather and the availability of heavy machinery.
The coal price factor is another challenge for industry players to improve their performance in 2023. The disparity in the national coal selling price has prevented companies from maximizing the increase in commodity prices.
“Moreover, the production costs continue to increase, which include the rising fuel prices and royalty rates,” said Hendra Sinadia, Executive Director of the Indonesian Coal Mining Association (APBI).
Gold production sees a positive rise
According to the ABN AMRO, the US dollar will weaken and the Federal Reserve System will decrease its interest rates in Q2 2023.
These factors spark speculations that the gold price will rebound. However, the price of gold will be predicted not to see new heights since other central banks are not cutting their interests to fight inflation. Even when economies go down, the price of gold at the end of 2023 will reach US$ 1,900 per ounce.
The Gold Strategy Experty of ABN AMRO, Georgette Boele, had said in August 2022, that the US dollar would still be mighty and predicted the price of gold to reach US$ 1,700 per ounce at the end of the year.
A domestic gold mining company in Indonesia also targets positive growth. PT Freeport Indonesia aims to reach a production target of 1.8 million tons of gold and 1.7 billion tons of copper in 2023.
The government is seeking a downstream effort in the mining industry in 2023 with an investment worth US$ 30 billion for smelter constructions.