TEMPO.CO, Jakarta - The Association of Indonesian Coal Miners (APBI) has noted that 5,000 workers in East Kalimantan have been laid off as coal prices continued to dip in recent years, and warned that more workers are at risk of being lad off should prices continued to fall.
"This is a serious issue - but we have no other choices but to lay off these workers," said the Deputy Executive Director for APBI, Hendra Sinadia, on Tuesday, August 4.
The mass lay-off had to be done because around 80 percent of coal mines in East Kalimantan had to cease operations. At present, out of the 3,000 coal mines that holds a permit to operate, only 500 are still operating. "The majority that continues to operate are large companies with massive capitalisations and cash reserves," said Hendra.
According to Hendra, the continuous decline of coal prices have caused smaller companies to lose a significant portion of their profit since 2014. The continuous decline has caused the margin between profit amd operational cost to soar by 60 percent.
This phenomenon is not unique to Indonesia - in fact, the World Coal Association, said that the deficit is most pronounced in China, where the disparity between operating costs and profit has reached 70 percent.
Hendra said that in order to prevent more lay-offs from occuring, the government needs to streamline regulations in order to mitigate the impact of the declining prices. Furthermore, he called on the government to close down illegal mines - which will help to prevent oversupply in the market.
The Director General for Minerals and Coal for the Ministry of Energy and Mineral Resources, Bambang Gatot Ariono, said that local coal mining companies are faced with an impending crisis. Bambang said that the Ministry will do whatever it can to mitigate the impact of the crisis, by putting in regulations to help stem operational costs from ballooning, until coal prices begin to stabilise.
It is known that Indonesia is one of the world's biggest coal exporter - as such, it is significantly affected by the drop in the commodity's price, which began in 2014.
In June 2015, coal sells at US$59,16 per tonne. In June 2014, the same amount of coal were sold at US$72,45.