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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, 09 September 20
MARKET INSIGHT - INTERMODAL
The uneventful summer lull which is coming to an end soon has left its stigma on the newbuilding market, which has already been devastated by the g ...
Saturday, 05 September 20
INDIA WON'T KICK ITS COAL HABIT SO EASILY - HINDU BUSINESS LINE
India has traditionally considered itself lucky to have been endowed with abundant coal reserves, which it has sought to use to meet its energy nee ...
Saturday, 05 September 20
FINANCING COMPLETE FOR 900MW FIFTH PHASE OF MASSIVE DUBAI SOLAR PARK: ARABIAN BUSINESS
Saudi-based ACWA Power on Thursday announced it has completed the signing of all financing agreements for the fifth phase of the Mohammed bin Rashi ...
Saturday, 05 September 20
POLISH COAL DEMAND EXPECTED TO FALL BY 7 MLN TONNES NEXT YEAR: MINISTER - REUTERS
Poland’s demand for coal is expected to fall by around 7 million tonnes next year, or more than 10% of annual hard coal production, after a d ...
Saturday, 05 September 20
PAKISTAN'S NEW 27-YEAR POWER PLAN RISKS LOCKING IN LONG-TERM OVERCAPACITY, LEAVING IMPORTED COAL AND LNG PLANTS STRANDED - IEEFA
Wind and solar, the country’s cheapest source of new generation, also overlooked
Pakistan risks locking itself into building m ...
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- Mjunction Services Limited - India
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- Australian Coal Association
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- Carbofer General Trading SA - India
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- CNBM International Corporation - China
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Tata Chemicals Ltd - India
- International Coal Ventures Pvt Ltd - India
- Makarim & Taira - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- Sical Logistics Limited - India
- Tamil Nadu electricity Board
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Planning Commission, India
- Singapore Mercantile Exchange
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Sojitz Corporation - Japan
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Lanco Infratech Ltd - India
- Posco Energy - South Korea
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Romanian Commodities Exchange
- Jindal Steel & Power Ltd - India
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- Eastern Energy - Thailand
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- Maheswari Brothers Coal Limited - India
- Marubeni Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Mercuria Energy - Indonesia
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- Economic Council, Georgia
- Sarangani Energy Corporation, Philippines
- SMC Global Power, Philippines
- White Energy Company Limited
- Bangladesh Power Developement Board
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Star Paper Mills Limited - India
- Altura Mining Limited, Indonesia
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Indian Energy Exchange, India
- McConnell Dowell - Australia
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Mercator Lines Limited - India
- Wood Mackenzie - Singapore
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- IEA Clean Coal Centre - UK
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Thiess Contractors Indonesia
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Meralco Power Generation, Philippines
- Orica Mining Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- Edison Trading Spa - Italy
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Coalindo Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Transport, Egypt
- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- The University of Queensland
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Trasteel International SA, Italy
- Karaikal Port Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Videocon Industries ltd - India
- Parliament of New Zealand
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Minerals Council of Australia
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- Pendopo Energi Batubara - Indonesia
- Africa Commodities Group - South Africa
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
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