Indonesia's Illegal Coal Mines Feed China

Trucks transport coal through the night from often-illegal Indonesian mines to ports for shipment to China.
Trucks transport coal through the night from often-illegal Indonesian mines to ports for shipment to China. (By Alan Sipress -- The Washington Post)
By Alan Sipress
Washington Post Foreign Service
Wednesday, September 21, 2005

SUNGAI DANAU, Indonesia -- Under cover of darkness, hundreds of trucks brimming with coal crawl along the main street of this river town on the southeast corner of Borneo, a column of headlights burning through billowing dust.

The nightly procession starts about two hours after sunset and presses on until dawn as the trucks ferry their cargo from scores of often-illegal mines in the nearby hills to small ports nestled along the banks. Much of this coal is destined for China to meet that country's voracious appetite for energy to power its dramatic economic growth.

The Chinese coal rush has helped transform the coast of Indonesia's South Kalimantan province since late 2003 as traders from China have streamed into Borneo, seeking to exploit a largely unregulated landscape populated by dealmakers, gangsters and wildcat miners.

"In the last two years, the Chinese have become very aggressive. They are hunters searching for coal from everybody," said Moyo Sophyan Toersilo, who manages one of the larger mining operations in the province.

China, a large and growing consumer of minerals and other natural resources, is increasingly looking south to Indonesia. Despite a history of strained relations, trade between China and Indonesia was up by nearly a third last year and is on track to expand faster this year, according to Indonesian officials. And following reciprocal visits this year by the presidents of China and Indonesia, the two governments set a goal of doubling bilateral trade to $30 billion in the next five years.

Officials have announced that China will expand its investment in Indonesian oil production and iron ore mines. China has agreed to invest $8 billion in Borneo plantations for the production of palm oil -- used in cooking, soap and detergent -- while a major new Chinese tin mine also is under discussion. Two months ago, during Indonesian President Susilo Bambang Yudhoyono's visit to Beijing, top officials signed a deal under which China will help develop a railway and canals to ship coal from Sumatra and then purchase about 20 million tons annually for 15 years.

China was a major coal exporter until two years ago, when it redirected its production to meet local demand. Indonesia has now supplanted China as the world's second-largest coal exporter, and industry experts predict Indonesia soon could pass Australia to become the top supplier of steam coal.

Toersilo recalled the day in April 2004 when Chinese business leaders first appeared unannounced at his modest office in Sungai Danau. "They looked like tourists to us," he recounted.

The Chinese quizzed Toersilo about his mining site, production capacity and facilities for crushing coal for shipment. They requested to see the port south of town and asked how long it took coal barges to reach ships off shore. Within a month, they notified Toersilo they would dispatch a vessel every two weeks to pick up coal for a power plant in China's southern Guangdong province. Toersilo said he now sends them at least 150,000 metric tons a month.

In June, the head of a provincial chamber of commerce in China asked to purchase 300,000 metric tons monthly. Toersilo responded his company could provide nearly half that and expected to begin shipments in September.

But the construction of five new piers to accommodate the trade is running behind, Toersilo explained. "There just isn't enough port space any more," he said.

Industry experts say that Indonesia's official export figures do not reflect all the coal shipped by small, illegal mining operations in South Kalimantan, much of it bound for China. "I bet no one has current and accurate data about what is happening out there," said a senior official in Indonesia's Ministry of Energy and Mineral Resources.

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