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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, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Tamil Nadu electricity Board
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- White Energy Company Limited
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Indian Energy Exchange, India
- Romanian Commodities Exchange
- Planning Commission, India
- Africa Commodities Group - South Africa
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Makarim & Taira - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Borneo Indobara - Indonesia
- The University of Queensland
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petron Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- GMR Energy Limited - India
- Essar Steel Hazira Ltd - India
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- Therma Luzon, Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Directorate General of MIneral and Coal - Indonesia
- Medco Energi Mining Internasional
- Leighton Contractors Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- Aditya Birla Group - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Marubeni Corporation - India
- Central Electricity Authority - India
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- Semirara Mining Corp, Philippines
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Trasteel International SA, Italy
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- The Treasury - Australian Government
- Energy Link Ltd, New Zealand
- MS Steel International - UAE
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- Videocon Industries ltd - India
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Bhatia International Limited - India
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Salva Resources Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Renaissance Capital - South Africa
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- Electricity Authority, New Zealand
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- Heidelberg Cement - Germany
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Economic Council, Georgia
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Ministry of Transport, Egypt
- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- LBH Netherlands Bv - Netherlands
- SMG Consultants - Indonesia
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Intertek Mineral Services - Indonesia
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- Indo Tambangraya Megah - Indonesia
- Australian Coal Association
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- London Commodity Brokers - England
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- Independent Power Producers Association of India
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Binh Thuan Hamico - Vietnam
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- Bukit Makmur.PT - Indonesia
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