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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, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- GMR Energy Limited - India
- Energy Development Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- CNBM International Corporation - China
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- Bulk Trading Sa - Switzerland
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Iligan Light & Power Inc, Philippines
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Coalindo Energy - Indonesia
- India Bulls Power Limited - India
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- Samtan Co., Ltd - South Korea
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- VISA Power Limited - India
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Altura Mining Limited, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Antam Resourcindo - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- Globalindo Alam Lestari - Indonesia
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Sinarmas Energy and Mining - Indonesia
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Aditya Birla Group - India
- Eastern Coal Council - USA
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Attock Cement Pakistan Limited
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Orica Mining Services - Indonesia
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- White Energy Company Limited
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Gujarat Sidhee Cement - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- Price Waterhouse Coopers - Russia
- Trasteel International SA, Italy
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- New Zealand Coal & Carbon
- Billiton Holdings Pty Ltd - Australia
- Marubeni Corporation - India
- ASAPP Information Group - India
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- Energy Link Ltd, New Zealand
- Bhatia International Limited - India
- Goldman Sachs - Singapore
- Renaissance Capital - South Africa
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Minerals Council of Australia
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Grasim Industreis Ltd - India
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- TeaM Sual Corporation - Philippines
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Australian Coal Association
- Cement Manufacturers Association - India
- Global Coal Blending Company Limited - Australia
- PetroVietnam Power Coal Import and Supply Company
- Siam City Cement - Thailand
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Straits Asia Resources Limited - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- McConnell Dowell - Australia
- Semirara Mining and Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Petron Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- Indika Energy - Indonesia
- Thai Mozambique Logistica
- Commonwealth Bank - Australia
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Maharashtra Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Central Java Power - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Medco Energi Mining Internasional
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- MS Steel International - UAE
- Planning Commission, India
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Singapore Mercantile Exchange
- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Binh Thuan Hamico - Vietnam
- Thiess Contractors Indonesia
- Parliament of New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Xindia Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Economic Council, Georgia
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