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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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Thursday, 25 January 24
THE RED SEA ESCALATION IMPLICATIONS ON GLOBAL SEABORNE TRADE - MARIA BERTZELETOU
In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market ...
Thursday, 25 January 24
RED SEA SHIPPING DISRUPTIONS KEEP GEOPOLITICAL PREMIUM FOR COMMODITIES - FITCH RATINGS
Shipping disruptions and re-routing away from the Red Sea will maintain the geopolitical premium in the main commodity markets, including for oil a ...
Friday, 19 January 24
INDONESIA TARGETS 710 MLN METRIC TONS COAL OUTPUT IN 2024 AFTER RECORD 2023 - REUTERS
Indonesia, a major thermal coal exporter, aims to produce 710 million metric tons of coal in 2024, its mining minister said on Monday, after postin ...
Friday, 19 January 24
DRUMMOND COLOMBIA COAL OUTPUT ROSE 7.1% IN 2023 - REUTERS
Coal production from miner Drummond’s Colombia operations rose 7.1% in 2023 to 29.5 million metric tons, while exports declined by 2.6% to 27 ...
Friday, 19 January 24
CHINA'S 2023 COAL OUTPUT HITS RECORD HIGH - REUTERS
China’s coal output reached a record high in 2023, data from the statistics bureau showed on Wednesday, amid an ongoing focus on energy secur ...
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- Attock Cement Pakistan Limited
- Asmin Koalindo Tuhup - Indonesia
- Merrill Lynch Commodities Europe
- Independent Power Producers Association of India
- Meralco Power Generation, Philippines
- TeaM Sual Corporation - Philippines
- Indonesian Coal Mining Association
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- Makarim & Taira - Indonesia
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Siam City Cement - Thailand
- Chamber of Mines of South Africa
- Xindia Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- Directorate General of MIneral and Coal - Indonesia
- India Bulls Power Limited - India
- Indogreen Group - Indonesia
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Antam Resourcindo - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Global Business Power Corporation, Philippines
- Coal and Oil Company - UAE
- Billiton Holdings Pty Ltd - Australia
- Intertek Mineral Services - Indonesia
- New Zealand Coal & Carbon
- The Treasury - Australian Government
- Eastern Energy - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Renaissance Capital - South Africa
- Bharathi Cement Corporation - India
- San Jose City I Power Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Maheswari Brothers Coal Limited - India
- International Coal Ventures Pvt Ltd - India
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- SMG Consultants - Indonesia
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- VISA Power Limited - India
- PTC India Limited - India
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
- Mjunction Services Limited - India
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- South Luzon Thermal Energy Corporation
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- Kapuas Tunggal Persada - Indonesia
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- OPG Power Generation Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Banpu Public Company Limited - Thailand
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Simpson Spence & Young - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- Edison Trading Spa - Italy
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Riau Bara Harum - Indonesia
- IEA Clean Coal Centre - UK
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- Rashtriya Ispat Nigam Limited - India
- Central Electricity Authority - India
- Carbofer General Trading SA - India
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Jaiprakash Power Ventures ltd
- Oldendorff Carriers - Singapore
- Ambuja Cements Ltd - India
- SMC Global Power, Philippines
- SN Aboitiz Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- Bank of Tokyo Mitsubishi UFJ Ltd
- Altura Mining Limited, Indonesia
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Bulk Trading Sa - Switzerland
- Sical Logistics Limited - India
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
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