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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, 06 September 24
REBOUND IN OIL DEMAND COULD LIFT MARKET IN LATTER HALF OF 2024 - BIMCO
Supply/demand
Based on a strong second half demand, the supply/balance is forecast to strengthen in 2024 but weaken slightly in 2025 as n ...
Friday, 06 September 24
GLOBAL SEABORNE LNG TRADE HAS CONTINUED TO INCREASE LAST YEAR - BANCHERO COSTA
Global seaborne LNG trade has continued to increase last year, helped also by the events in Ukraine which forced Europe to diversify away from Russ ...
Wednesday, 28 August 24
SEABORNE COAL IMPORTS INTO INDIA INCREASED BY +9.9% Y-O-Y TO 146.6 MLN T - BANCHERO COSTA
Global coal trade has really picked up pace over the past year, and is now fully back to pre-Covid levels said Banchero Costa Research in its lates ...
Tuesday, 06 August 24
EXERCISE CAUTION WITH AMMONIA SWITCH - BALTIC EXCHANGE
A new study from the Massachusetts Institute of Technology (MIT) has thrown a spanner into the plan to transition ships from diesel fuel to ammonia ...
Friday, 02 August 24
ENERGY MARKET DEVELOPMENTS: COAL AND NATURAL GAS PRICES REACH RECORD HIGHS - WORLD BANK
The recent surge in natural gas and coal prices has been so swift that the main benchmarks were roughly three times higher in 2022Q2 compared to a ...
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- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Sarangani Energy Corporation, Philippines
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Jaiprakash Power Ventures ltd
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- Sojitz Corporation - Japan
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- International Coal Ventures Pvt Ltd - India
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Globalindo Alam Lestari - Indonesia
- SMC Global Power, Philippines
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Parliament of New Zealand
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Chettinad Cement Corporation Ltd - India
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Marubeni Corporation - India
- Orica Mining Services - Indonesia
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Barasentosa Lestari - Indonesia
- VISA Power Limited - India
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- SMG Consultants - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Formosa Plastics Group - Taiwan
- Posco Energy - South Korea
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Global Green Power PLC Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Heidelberg Cement - Germany
- Australian Coal Association
- Vizag Seaport Private Limited - India
- PTC India Limited - India
- Minerals Council of Australia
- Agrawal Coal Company - India
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Mintek Dendrill Indonesia
- London Commodity Brokers - England
- Ministry of Mines - Canada
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Salva Resources Pvt Ltd - India
- Bhatia International Limited - India
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- India Bulls Power Limited - India
- Meenaskhi Energy Private Limited - India
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- LBH Netherlands Bv - Netherlands
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- Chamber of Mines of South Africa
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Commonwealth Bank - Australia
- GAC Shipping (India) Pvt Ltd
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Directorate Of Revenue Intelligence - India
- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Tata Chemicals Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- Mercuria Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Kartika Selabumi Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Kobexindo Tractors - Indoneisa
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Toyota Tsusho Corporation, Japan
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
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