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Tuesday, 11 June 13
COAL: NO SIGN OF RECOVERY - GABRIELLA
 COALspot.com: We attended the 19th Annual Coaltrans Asia Conference, where we found most of the speakers were not very optimistic on the outlook for coal mining in the months ahead. The main concern is abundant supply outreaching demand growth.
We maintain an UNDERWEIGHT recommendation on the sector.
However, for investors still seeking some exposure to the coal mining sector, PTBA is a solid defensive play given:
1) its low cost structure and defensive earnings,
2) its abundant reserves supporting strong production growth and
3) its strong balance sheet. Going forward, we foresee further declines in EPS due to continued depressed coal prices which will result in lower Target Prices from current levels. Below are some key takeaways:
Coal Mining Conditions in Indonesia as the biggest exporter
As of May 2013, Indonesia’s coal resources amounted to 159bn tons with coal reserves of 32bn tons – about 3% of the world’s coal reserves. Presently, there are 76 Coal Agreements (PKP2B) and 3,892 coal licenses (IUP). Most of them are for operations in Kalimantan and Sumatra. The majority are in Kalimantan which has 61 PKP2B (80%) and 2,670 IUP (69%). All in all, Kalimantan accounts for around 90% of the total national coal production. Most of the IUP (around 80%) are at the exploration stage with the rest in the production stage. There are problems with around 400 IUP. Most of the coal production is undertaken by coal agreement holders and SOE (which account for around 70% of the national coal production).
Fuelling Indonesia’s domestic coal demand: an additional 55GW of power generation capacity
Indonesia’s electricity demand growth is still high (9.4% per year), with PLN, the state electricity company as the biggest coal buyer in Indonesia (66mn tons in 2013). PLN has stated that electricity supply in Indonesia will continue to rely on coal fired power plants (CFPP) for at least the next 10 years given the relatively cheap production costs involved. By 2020, PLN expects total additional power generation capacity to reach 55GW (PLN: 31GW, IPP: 24GW). Of this amount, 35GW or 65% is expected to come from coal power plants translating into additional coal demand of around 100mn tons p.a.
China’s Coal Import Restrictions: 50mn tons from Indonesia
From 2010 to 2012, China’s thermal coal imports increased each year, more than doubling from 71mn tons to 155mn tons, with Indonesia’s thermal coal amounting to 54% of the total in 2012. This year, China is expected to import 380mn tons of coal in total (+31% or half last year’s growth rate). One of the hot issues being discussed was China’s coal import restrictions stipulating: 1) a minimum CV of 3,750kcal/kg (NAR), 2) maximum sulphur content of 2% and 3) maximum ash content of 25%. Around 30% of China’s steam coal imports - or about 50mn tons coming from Indonesia - were lignite. India would benefit from China implementing an imports ban as it would mean lower prices. In 1Q13, however, China’s coal imports still showed an increase of 30% yoy.
Future of Indonesia’s low rank coal
The government seeks a greater role for domestic coal, especially in LRC (mine mouth power plants, gasification, liquefaction). Indonesia has abundant low rank coal resources, accounting for 40% of Indonesia’s total resources, with medium and high rank coal accounting for about 50% and 10%, respectively. There is a need to foster greater international cooperation to develop the technology for the utilization of low rank coal for domestic needs by implementing Clean Coal Technologies with build operate transfer schemes (BOT schemes) to improve calorific value and efficiency.
A Challenging Outlook
The outlook for coal mining will remain challenging, in our view, given the currently depressed coal prices (down 5% average YTD) and persistent global economic headwinds. China and India combined account for more than 30% of the world’s seaborne import volume. Their dominance is expected to continue with potential growth seen in India. Environmental and Regulatory issues will limit coal imports growth, however, as reflected in China’s draft proposal for a ban on imports and the current development of Hydropower and Nuclear generation.
Adding to the woes, Indonesia’s new draft regulation (increasing coal royalties, export quotas) has worsened the investment climate for coal producers in the country.
The author of this article Ms. Maureen Natasha, an equity analyst in PT Danareksa Sekuritas. Danareksa is a pioneering Indonesian financial institution and was the first to introduce mutual funds in Indonesia. It was also the first to launch a US Dollar-denominated fixed-income fund and promote syariah-based investments. Today, Danareksa is the only local company to offer direct market access services to clients worldwide and has grown to become the company that has underwritten the most equity and debt placements in Indonesia.
Views and opinions / conclusion expressed herein are personal views of the author and not that of COALspot.com. This article is subject to disclaimer terms of PT. Danareksa Sekuritas.
If you believe an article violates your rights or the rights of others, please contact us.
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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
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- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Mercator Lines Limited - India
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Borneo Indobara - Indonesia
- Romanian Commodities Exchange
- South Luzon Thermal Energy Corporation
- Leighton Contractors Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- MS Steel International - UAE
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Karaikal Port Pvt Ltd - India
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bharathi Cement Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Pendopo Energi Batubara - Indonesia
- Simpson Spence & Young - Indonesia
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- ASAPP Information Group - India
- Jorong Barutama Greston.PT - Indonesia
- Antam Resourcindo - Indonesia
- New Zealand Coal & Carbon
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Africa Commodities Group - South Africa
- Madhucon Powers Ltd - India
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Sarangani Energy Corporation, Philippines
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Renaissance Capital - South Africa
- PTC India Limited - India
- Deloitte Consulting - India
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- GVK Power & Infra Limited - India
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Jaiprakash Power Ventures ltd
- Savvy Resources Ltd - HongKong
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Singapore Mercantile Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- PetroVietnam Power Coal Import and Supply Company
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Baramulti Group, Indonesia
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Eastern Energy - Thailand
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Uttam Galva Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Goldman Sachs - Singapore
- Chamber of Mines of South Africa
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Asmin Koalindo Tuhup - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- Samtan Co., Ltd - South Korea
- European Bulk Services B.V. - Netherlands
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Bhoruka Overseas - Indonesia
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