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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, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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- Renaissance Capital - South Africa
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Planning Commission, India
- Australian Commodity Traders Exchange
- Georgia Ports Authority, United States
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- PTC India Limited - India
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- Global Green Power PLC Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Trasteel International SA, Italy
- Videocon Industries ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- PNOC Exploration Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Central Java Power - Indonesia
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Kaltim Prima Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Larsen & Toubro Limited - India
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Madhucon Powers Ltd - India
- Baramulti Group, Indonesia
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Africa Commodities Group - South Africa
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Bhoruka Overseas - Indonesia
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Australian Coal Association
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The State Trading Corporation of India Ltd
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Altura Mining Limited, Indonesia
- Rio Tinto Coal - Australia
- GMR Energy Limited - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Central Electricity Authority - India
- Sree Jayajothi Cements Limited - India
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Tamil Nadu electricity Board
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Wilmar Investment Holdings
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- The University of Queensland
- Kumho Petrochemical, South Korea
- Neyveli Lignite Corporation Ltd, - India
- Binh Thuan Hamico - Vietnam
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Heidelberg Cement - Germany
- Banpu Public Company Limited - Thailand
- Star Paper Mills Limited - India
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Gujarat Sidhee Cement - India
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Indian Energy Exchange, India
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Minerals Council of Australia
- Cigading International Bulk Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Posco Energy - South Korea
- Goldman Sachs - Singapore
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- Chettinad Cement Corporation Ltd - India
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Grasim Industreis Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- MS Steel International - UAE
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
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