Coal companies are spending coal profits on almost anything but coal

The companies that made Indonesia the world's largest exporter of thermal coal are busy buying their way out of it. Nikkei Asia reports that the big producers are speeding up their move into other lines of business: lithium, aluminium, gold, solar power and coal gasification. The money paying for all of it is coal money, earned while prices have been good.

The clearest example is Alamtri Resources Indonesia, the group that used to be called Adaro Energy. It is preparing to ship its first batch of aluminium ingots from a smelter in North Kalimantan. Indika Energy, another coal house, is going into gold. Gasification, also on the list, means turning coal into a gas that can be used to make chemicals and fuels, instead of simply burning it in a power station.

Nikkei puts two pressures behind the rush. One is volatility abroad, which is the plain fact that the coal price now swings hard and fast, so a year of strong earnings tells a company almost nothing about the next one. The other is policy uncertainty at home: the rules keep moving, so a miner cannot be confident about how much it will be allowed to dig or what it will owe the state. Put those together and a business in a different sector starts to look like the safer place for the cash. The shift worth noticing is that this is no longer one firm hedging its bets. It is the industry doing it at once.

Why it matters

Coal still supplies a large share of Indonesia's export earnings and of the royalties the state collects, so where the miners put their profits now is really a decision about where the industrial jobs sit in ten years. If you live near a mine in Kalimantan or Sumatra, note that a smelter or a solar plant does not have to be built where the pit is, and it does not hire the same people. The companies are preparing for a smaller coal business well before the national budget is, and that gap is worth watching.