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July 30, 2008

Unseasonal rains hit coal output in Indonesia
Heavy rainfall in Indonesia's coal producing region of Kalimantan has hit output in the world's largest thermal coal exporter, but firms have not defaulted on sales agreements, Reuters quoted Indonesian producers as saying Tuesday.

Key Indonesian producers, such as PT Bumi Resources BUMI.JK and PT Adaro, told Reuters that unseasonal rains in the past week have impacted production and has forced some of them to delay shipments.

"It has been raining for the past seven days and that is affecting production. Shipments are still going on but we've had to move vessels around and push back some shipments," said a source at Bumi Resources, which produces about a third of Indonesia's total thermal coal output through its subsidiaries PT Kaltim Prima and PT Arutmin.

Kaltim Prima coal mines are located in east Kalimantan. A spokesman from Bumi said the impact rain on production was limited and changes to coal shipping schedules were largely due to an inventory management process.

A source from PT Adaro, Indonesia's second-largest coal producer with coal mines in south Kalimantan, said the unexpected rainfall has slowed production but added that the impact was not major.

Strait Asia Resources has delayed some shipments as the extended rainfalls have affected production and coal loading at its port, a company source said.
Industry sources said no firms have declared force majeure on shipments yet, but it was too early to say if the weather would improve.

Coal production in the Kalimantan region is often hampered during monsoon season, which typically begins in December and lasts through to March. But miners usually bank on the dry season, which lasts from June to December, to catch up on production.

Miners say the amount of rainfall this year was much less than last year's deluge that forced companies including Thailand's Banpu and Straits Asia Resources Ltd declare force majeure on contracted shipments from their mines in south Kalimantan, which in turn caused Asian coal prices to jump.

"Last year it was raining all day but this time around we only get rain in the morning and it would be over by the afternoon," said a producer.

Analysts said any force majeures from Indonesia would tighten the Pacific coal market, which was in a tight balance with most key exporting nations unable to boost output due to infrastructure constraints.

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