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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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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Parry Sugars Refinery, India
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Central Electricity Authority - India
- Globalindo Alam Lestari - Indonesia
- SMC Global Power, Philippines
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Baramulti Group, Indonesia
- The University of Queensland
- Power Finance Corporation Ltd., India
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Rio Tinto Coal - Australia
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- London Commodity Brokers - England
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- PNOC Exploration Corporation - Philippines
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Global Business Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Chettinad Cement Corporation Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Coal Blending Company Limited - Australia
- TeaM Sual Corporation - Philippines
- Coalindo Energy - Indonesia
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Altura Mining Limited, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- Orica Mining Services - Indonesia
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- The State Trading Corporation of India Ltd
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- Singapore Mercantile Exchange
- San Jose City I Power Corp, Philippines
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement PLC, Thailand
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Meralco Power Generation, Philippines
- White Energy Company Limited
- Eastern Energy - Thailand
- New Zealand Coal & Carbon
- VISA Power Limited - India
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Planning Commission, India
- Bhushan Steel Limited - India
- Medco Energi Mining Internasional
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Africa Commodities Group - South Africa
- Binh Thuan Hamico - Vietnam
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- The Treasury - Australian Government
- IEA Clean Coal Centre - UK
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Indika Energy - Indonesia
- Xindia Steels Limited - India
- Romanian Commodities Exchange
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Central Java Power - Indonesia
- AsiaOL BioFuels Corp., Philippines
- PetroVietnam Power Coal Import and Supply Company
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- SMG Consultants - Indonesia
- Minerals Council of Australia
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Billiton Holdings Pty Ltd - Australia
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- LBH Netherlands Bv - Netherlands
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Barasentosa Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Mercator Lines Limited - India
- Leighton Contractors Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Indogreen Group - Indonesia
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