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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, 07 June 13
MEDITERRANEAN COAL MARKETS
Press Release: 3rd International Conference Mediterranean Coal Markets will be held on 16-17th of September 2013, Istanbul, Turkey, Ceylan Intercont ...
Friday, 07 June 13
US'S COAL PRODUCTION INCREASED BY 0.54 PER CENT THE WEEK ENDED JUNE 1
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.60 million short tons (mmst) of ...
Thursday, 06 June 13
WE ARE SEEING SOME FRESH INDO COAL TO CHINA AND INDIA - FEARNRESEARCH
Handy
In the Atlantic, the Gulf remains firm for the next week with a few orders in the market. The Supramaxes are seeing around low 20k for fronth ...
Wednesday, 05 June 13
DON'T AVOID PAYING COAL ROYALTY TO THE GOVERNMENT - INDONESIAN ENERGY MINISTER
COALspot.com – “Every country has the right to make policies to protect their national interests”, Energy and Mineral Resources Mi ...
Tuesday, 04 June 13
NEWCASTLE PORT SHIPPED 2.56 MILLION TONS OF COAL IN A WEEK
COALspot.com - Newcastle port in Australia has loaded 2,563,596 tons of coal for week ended 0700 hours 3 June 2013, Newcastle Port Corp. said ...
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- PNOC Exploration Corporation - Philippines
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Neyveli Lignite Corporation Ltd, - India
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Simpson Spence & Young - Indonesia
- Mercator Lines Limited - India
- Mintek Dendrill Indonesia
- Ministry of Transport, Egypt
- Petrochimia International Co. Ltd.- Taiwan
- Africa Commodities Group - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Energy Development Corp, Philippines
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- GAC Shipping (India) Pvt Ltd
- South Luzon Thermal Energy Corporation
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- PetroVietnam Power Coal Import and Supply Company
- International Coal Ventures Pvt Ltd - India
- ASAPP Information Group - India
- Central Electricity Authority - India
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Semirara Mining Corp, Philippines
- Meralco Power Generation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Medco Energi Mining Internasional
- Siam City Cement - Thailand
- Larsen & Toubro Limited - India
- Commonwealth Bank - Australia
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- McConnell Dowell - Australia
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Bahari Cakrawala Sebuku - Indonesia
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Coastal Gujarat Power Limited - India
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Parliament of New Zealand
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMG Consultants - Indonesia
- Vizag Seaport Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- The University of Queensland
- Australian Coal Association
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- European Bulk Services B.V. - Netherlands
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Merrill Lynch Commodities Europe
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- GVK Power & Infra Limited - India
- Indika Energy - Indonesia
- IEA Clean Coal Centre - UK
- TNB Fuel Sdn Bhd - Malaysia
- Timah Investasi Mineral - Indoneisa
- Malabar Cements Ltd - India
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bharathi Cement Corporation - India
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- London Commodity Brokers - England
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
- Global Business Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Rashtriya Ispat Nigam Limited - India
- India Bulls Power Limited - India
- Energy Link Ltd, New Zealand
- Krishnapatnam Port Company Ltd. - India
- The Treasury - Australian Government
- MS Steel International - UAE
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- GMR Energy Limited - India
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Kartika Selabumi Mining - Indonesia
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Coal and Oil Company - UAE
- PTC India Limited - India
- Edison Trading Spa - Italy
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
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