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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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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
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 ...
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- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Vedanta Resources Plc - India
- Star Paper Mills Limited - India
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Timah Investasi Mineral - Indoneisa
- Indonesian Coal Mining Association
- Indogreen Group - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Aboitiz Power Corporation - Philippines
- Singapore Mercantile Exchange
- Global Business Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Global Coal Blending Company Limited - Australia
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Planning Commission, India
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Meralco Power Generation, Philippines
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Simpson Spence & Young - Indonesia
- Ambuja Cements Ltd - India
- Parry Sugars Refinery, India
- Parliament of New Zealand
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Karaikal Port Pvt Ltd - India
- VISA Power Limited - India
- Xindia Steels Limited - India
- PTC India Limited - India
- Commonwealth Bank - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Toyota Tsusho Corporation, Japan
- Carbofer General Trading SA - India
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Formosa Plastics Group - Taiwan
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Posco Energy - South Korea
- Miang Besar Coal Terminal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Africa Commodities Group - South Africa
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- ICICI Bank Limited - India
- Siam City Cement PLC, Thailand
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Power Finance Corporation Ltd., India
- Trasteel International SA, Italy
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- MS Steel International - UAE
- Directorate General of MIneral and Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bulk Trading Sa - Switzerland
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- McConnell Dowell - Australia
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Bangladesh Power Developement Board
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- The University of Queensland
- Bhatia International Limited - India
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Eastern Coal Council - USA
- Samtan Co., Ltd - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GVK Power & Infra Limited - India
- Madhucon Powers Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Siam City Cement - Thailand
- PNOC Exploration Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
- Coastal Gujarat Power Limited - India
- Indian Energy Exchange, India
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Alfred C Toepfer International GmbH - Germany
- Interocean Group of Companies - India
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Globalindo Alam Lestari - Indonesia
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