NUSA DUA, Indonesia May 31 (Reuters) - Indonesian coal miner Adaro Energy expects 2011 coal production up 5 million tonnes from last year to 46-48 million tonnes, a director at the firm said on Tuesday.
Rising production costs are the biggest challenge facing Indonesia's largest coal miner, director Edwin Tsang told the Coaltrans Asia conference.
"We are putting in investments due to lower logistical costs, because heavy equipment costs are rising, labour rising, explosives costs are rising," said Tsang.
Indonesia, the world's top exporter of thermal coal, is expected to produce 340 million tonnes this year, compared with 320 million tonnes in 2010.
"I think around 310 (million tonnes) to just under 340," Tsang added. "As far as Adaro is concerned, this year our budget is to produce between 46 to 48 million tonnes."
"It's up ... by around close to 5 million tonnes," he added. "Next year is very difficult to say, probably it should be up -- closer to 50 million tones."
On Monday the Indonesian Coal Mining Association said India will overtake Japan as the top buyer of Indonesian coal this year, taking as much as 60 million tonnes to help meet its burgeoning power demand.
Japanese demand and imports were hit by the earthquake and tsunami to hit the country in March of this year, while India is attempting to boost its power supplies significantly in the coming years.
"This year we're expecting more than 45 percent of our production will go to India and China," said Eko BF Natalina, general manager of marketing and sales at Berau Coal .
"I'm fairly confident that these two countries will lead demand in the future, and in 2012 as well," he added. "In the first quarter of this year, China was quite silent but they come back and next year they will continue to contribute significantly to the coal market industry."
Natalina said Berau's coal output would be 20 million tonnes this year, rising to 23 million tonnes in 2012 and 30 million by 2014.
(Reporting by Michael Taylor; Editing by Michael Urquhart)