We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Thursday, 29 September 11
INDONESIA'S MINERS FACE AN UNCERTAIN FUTURE - RUPERT WALKER
 An evolving regulatory framework for the country's minerals industry could threaten its profitability and stifle investment.
The five-year surge in commodity prices has been kind to Indonesia. Certainly, there were shocks to both prices and volumes in late 2008, but the wealth created by the country's primary exports during that period has been sufficient to sustain its economic growth and underpin domestic consumption.
It has also given support to a resurgence of nationalist sentiment, reflected in legislation and the formation and implementation of new regulations. Understandably for a country that is growing more affluent and catching up with its regional neighbours, Indonesia no longer intends to be simply a repository for other countries' raw materials inputs. Instead, it plans to exploit its resources for its own burgeoning industrial and manufacturing base.
Also, as Indonesia's energy policy moves toward greater domestic coal usage, producers will be forced to negotiate new contracts at official prices with local buyers.
Earlier this year, the government said that it will ban exports of raw commodities by 2014. Miners would need to build smelters to add value to exports. For instance, ferronickel rather than the raw metal would be exported and coal would have to be blended to reach 5,600 kilo calories before it could be sold abroad.
The catalyst for the shift was the 2009 Mining Law which replaced the "Contract of Work" and "Coal Contract of Work" system in use since 1967. The aim is to stimulate the development of the country's mineral resources and help support broader-based economic growth. The 2009 act provides a basic framework, but government regulations from later that year, and in 2010, provided some clarity and are now expected to gather pace.
However, there are worries that the law will backfire and that these regulations will stifle future investment and damage the existing operations of Indonesia's miners.
"Indonesia's mining industry is undergoing a regulatory overhaul that is likely to weaken the operating and financial performance of domestic mining companies," warned Standard and Poor's Xavier Jean.
Standard & Poor’s argued in a report issued this summer that besides increasing operating uncertainty for Indonesian mining companies, the new regulations may also make the industry less attractive to foreign investors.
For instance, the mining law states that several government and ministerial regulations will need to be issued before its impact can be understood. There are also conflicts between mining operations and forestry regulations, overlapping authority between central and local governments and contradictory tax rules. Indeed, "a more clear legal framework would give investors more assurance about the predictability of policies," agreed Wellian Wiranto, Asia economist at HSBC, in a July research report. But he said he hoped that the evolving regulations "will only be implemented after intense feedback from industry players".
Domestic market obligations
It is likely some of the feedback will be about who bears an inordinate share of the burden. Some market participants note, for example, that the provisions on domestic market obligation (DMO) and reference pricing, where miners must sell a portion of the production domestically at a minimum reference price before exporting, will affect coal producers more than metals producers because the domestic demand for coal is higher than for metal ore. Given current and expected domestic coal consumption trends, Standard & Poor's estimated that the DMO could average 20% to 25% of the industry's annual coal production during the next five years, although this proportion could increase above 30% as Indonesia shifts its domestic energy mix from oil to coal during the next decade.
DMO and minimum reference price regulations could increase uncertainty about revenues and cash flows. If reference prices are set too low, it could lower the revenues for producers (given the lack of a domestic competitive market), reduce margins, and increase opportunity costs. If they are too high, they could hurt the government-owned electricity generator Perusahaan Listrik Negara (PLN), the largest domestic coal buyer, and hence make coal producers vulnerable to customer concentration risk.
Worst affected among coal miners will be those with small domestic sales because they will need to negotiate local contracts from scratch and rapidly increase local sales to meet regulatory requirements. Bayan Resources, with 2% of domestic sales last year, could fall into this category, and even Bumi Resources, whose domestic sales have been historically around 10%, might be exposed.
Meanwhile, miners now negotiating off-take contracts with PLN will be vulnerable to price risk. For example, Bukit Asam generated 64% of its revenues domestically in 2010 and is currently in negotiation for an off-take contract with PLN for 265 million tonnes of coal during the next 20 years.
Although the mining law grandfathers existing coal contracts of work, these new regulations will apply to both existing contracts and prospective mining investments. As S&P's Jean pointed out: "the provisions on DMO and reference pricing [and] domestic market processing...are likely to have the greatest impact on the Indonesian mining sector."
But, Standard & Poor's expects the government will take a few years "to calibrate the pricing system and balance producers' and consumers' interests", based on the experience from the implementation of oil and gas DMO in Indonesia. The regulatory environment is still evolving, after all, so when rules are ultimately enforced they tend to look different from their original forms.
A salutary warning
The allusion to Indonesia's oil industry is pertinent, however. The country was a substantial oil exporter until turning into an importer in 2004, and then finally leaving Opec in 2009.
Analysts blame a lack of investment in oil exploration. In the 1990s, Indonesia pumped out more than 1.5 million barrels a day; this year the average daily output is 916,000, well below the government's target of 970,000, according to HSBC's Wiranto. The World Bank calculated that investment in oil exploration is now less than half the $1 billion spent each year before the Asian financial crisis in the late 1990s.
Wiranto pointed out that Indonesia's resource riches are simply not matched by investment conditions in the commodity sector. He referred to a survey of international mining companies by the Fraser Institute that found that the "perceived lack of transparency in the legal process and the risk of regulatory duplication and inconsistencies continue to act as deterrents to more substantial investment".
Indonesia's production-to-reserves ratio for coal and copper is half that of its competitors (Australia, Chile and China), according to the World Bank. A poor investment environment could mean that the country's proven mineral resources are actually vastly underestimated.
So, it would be a pity if regulatory uncertainty and onerous obligations again prevent Indonesia from fully exploiting the benefits of its natural riches. Especially, given the laws were introduced to spur growth not cripple an industry. (By Rupert Walker)
About Rupert Walker
Rupert Walker is a senior writer and has been a financial journalist based in Hong Kong for three years. Previously he was employed by Asiamoney, and has written for various magazines and newspapers on assignments in Central Europe, Russia and Africa. Rupert was also a fund manager in London – investing in emerging markets for Govett Investment, working in capital markets for SG Warburg and Goldman Sachs, and setting up a capital markets business in Singapore for NatWest. He has a BA/MA in Modern History from Keble College, Oxford University and an MA in Anthropology from SOAS, London University. He is also a CFA charterholder.
This story was first published in FinanceAsia
The views and opinions / conclusion expressed on this article is purely the writers’ own.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Wednesday, 12 October 11
INDONESIAS COAL RUSH - JOSEPH KIRSCHKE
COALspot.com - Last winter, the Chinese government mobilized thousands of soldiers and reservists of the People’s Liberation Army to the port ...
Wednesday, 12 October 11
CAPESIZE - A SURPRISE JUMP IN RATES - BRS
There was a surge across all sizes last week, resulting in the BDI gaining 101 points to end the week at 2,000 points (+5.3%). The BCI reached 3,218 ...
Wednesday, 12 October 11
CAPESIZE FREIGHT RATES BOUND TO RETREAT FROM 2011 HIGHS ON THE BACK OF TONNAGE OVERSUPPLY SAYS BIMCO
According to Nikos Roussanoglou, Hellenic Shipping, with the BDI (Baltic Dry Index) breaking yet another 2011 high yesterday and ending the se ...
Tuesday, 11 October 11
GLENCORE, SUITOR FOR BUMI PLC? - INSIDER STORIES
Insider Stories reported that, the largest commodities trader in the world, Glencore International Plc, is considering an opportunity to acquire a m ...
Tuesday, 11 October 11
RENUKA COALINDO BUYS JAMBI COAL
PT Renuka Coalindo Tbk, formerly PT Allbond Makmur Usaha Tbk plans to acquire PT Jambi Prima Coal holder of mining concession in Pauh, Sa ...
|
|
|
Showing 5036 to 5040 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Edison Trading Spa - Italy
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- Africa Commodities Group - South Africa
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Kideco Jaya Agung - Indonesia
- Altura Mining Limited, Indonesia
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Karaikal Port Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- Billiton Holdings Pty Ltd - Australia
- Cement Manufacturers Association - India
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- South Luzon Thermal Energy Corporation
- Directorate Of Revenue Intelligence - India
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Sojitz Corporation - Japan
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Parliament of New Zealand
- PNOC Exploration Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- GVK Power & Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Ind-Barath Power Infra Limited - India
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Sakthi Sugars Limited - India
- Marubeni Corporation - India
- Petron Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- Global Green Power PLC Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- The University of Queensland
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Sical Logistics Limited - India
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Siam City Cement - Thailand
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- IHS Mccloskey Coal Group - USA
- Indika Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Riau Bara Harum - Indonesia
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Mercuria Energy - Indonesia
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Binh Thuan Hamico - Vietnam
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Xindia Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Globalindo Alam Lestari - Indonesia
- Australian Coal Association
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- Standard Chartered Bank - UAE
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- Bukit Baiduri Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Economic Council, Georgia
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Posco Energy - South Korea
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Planning Commission, India
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Power Finance Corporation Ltd., India
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Malabar Cements Ltd - India
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
- The State Trading Corporation of India Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Metalloyd Limited - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Miang Besar Coal Terminal - Indonesia
- Thiess Contractors Indonesia
- Bulk Trading Sa - Switzerland
- White Energy Company Limited
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
|
| |
| |
|
