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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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Tuesday, 13 February 24
WHAT IS THE OUTLOOK FOR THE NATURAL GAS SPOT PRICE IN 2024 AND 2025? EIA
We expect the U.S. benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023, but to remain lower than $3.00 per m ...
Monday, 12 February 24
US THERMAL COAL EXPORTS HIT 5-YEAR HIGHS AND TOP $5 BLN IN 2023 - REUTERS
United States exporters of thermal coal earned more than $5 billion in 2023 as they shipped out more than 32.5 million metric tons of the high-poll ...
Tuesday, 06 February 24
NEW E-FUELS PROJECT TO MAKE INTERNATIONAL SHIPPING CLIMATE-NEUTRAL - RINA
Transport and trade on the ocean blue must be made much greener. This is the goal of the new €17 million European GAMMA project, where compani ...
Tuesday, 06 February 24
INDIA SEES ANNUAL COAL OUTPUT UP 10.9% IN 2024/25 - REUTERS
India expects domestic coal output to increase by 10.9% to 1.13 billion metric tons in the fiscal year ending March 2025, a senior government offic ...
Tuesday, 06 February 24
INDIA'S COAL PRODUCTION INCREASES BY 10.3% TO 99.73 MILLION TONNE IN JANUARY - PTI
The country’s coal output rose 10.3 per cent to 99.73 Million Tonne (MT) in January, over the same month in the previous fiscal.
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- South Luzon Thermal Energy Corporation
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Asmin Koalindo Tuhup - Indonesia
- Billiton Holdings Pty Ltd - Australia
- SMG Consultants - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Mines - Canada
- Sindya Power Generating Company Private Ltd
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- The University of Queensland
- Malabar Cements Ltd - India
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- ICICI Bank Limited - India
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Heidelberg Cement - Germany
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Attock Cement Pakistan Limited
- Independent Power Producers Association of India
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Wood Mackenzie - Singapore
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Coastal Gujarat Power Limited - India
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- The State Trading Corporation of India Ltd
- Merrill Lynch Commodities Europe
- Orica Australia Pty. Ltd.
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Georgia Ports Authority, United States
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Borneo Indobara - Indonesia
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Tata Chemicals Ltd - India
- Eastern Coal Council - USA
- Parliament of New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Central Java Power - Indonesia
- Uttam Galva Steels Limited - India
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- Leighton Contractors Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- Australian Coal Association
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Simpson Spence & Young - Indonesia
- Coalindo Energy - Indonesia
- SMC Global Power, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Ambuja Cements Ltd - India
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- VISA Power Limited - India
- Savvy Resources Ltd - HongKong
- Maharashtra Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- Kaltim Prima Coal - Indonesia
- Economic Council, Georgia
- CNBM International Corporation - China
- PTC India Limited - India
- Planning Commission, India
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- Larsen & Toubro Limited - India
- Rashtriya Ispat Nigam Limited - India
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- White Energy Company Limited
- Sojitz Corporation - Japan
- MS Steel International - UAE
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Vedanta Resources Plc - India
- Dalmia Cement Bharat India
- Manunggal Multi Energi - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Finance - Indonesia
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
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