Chinese demand for Indonesian coal increases despite pollution fears

Agritrade Resources, a coal miner in Indonesia with mainland China as one of its top markets, aims to raise output and sales by 30 per cent despite slowing Chinese consumption because of rising demand for less polluting coal.

Ng Xin-wei, the chief executive of the Hong Kong-listed company, said it planned to mine and sell 4.5 million to 5 million tonnes of coal during this financial year to March, up from 3.8 million tonnes and 2.8 million tonnes in the past two financial years.

"Indonesia is close to both India and China, and its coal production cost is among the lowest in the world as 99 per cent of its output is from surface mining," Ng told the South China Morning Post. "It is cheaper to import seaborne coal into south China than from north China via railways."

Most of the coal powers the national grid. The mainland's electricity output growth slowed to 4.7 per cent in 2012, 7.6 per cent last year and 5.7 per cent in this year's first five months, from 12 to 13 per cent in 2010 and 2011. This in turn saw lower coal demand as some 75 per cent of the nation's power is generated by coal.

But the mainland imported 57.6 million tonnes of brown coal - with a relatively low heating value - from Indonesia last year, up from 50 million tonnes in 2012 and 35.7 million tonnes in 2011. Despite the lower heating value, most of the coal imported from Indonesia is blended with domestic coal to reduce pollutants.