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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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Thursday, 25 January 24
THE RED SEA ESCALATION IMPLICATIONS ON GLOBAL SEABORNE TRADE - MARIA BERTZELETOU
In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market ...
Thursday, 25 January 24
RED SEA SHIPPING DISRUPTIONS KEEP GEOPOLITICAL PREMIUM FOR COMMODITIES - FITCH RATINGS
Shipping disruptions and re-routing away from the Red Sea will maintain the geopolitical premium in the main commodity markets, including for oil a ...
Friday, 19 January 24
INDONESIA TARGETS 710 MLN METRIC TONS COAL OUTPUT IN 2024 AFTER RECORD 2023 - REUTERS
Indonesia, a major thermal coal exporter, aims to produce 710 million metric tons of coal in 2024, its mining minister said on Monday, after postin ...
Friday, 19 January 24
DRUMMOND COLOMBIA COAL OUTPUT ROSE 7.1% IN 2023 - REUTERS
Coal production from miner Drummond’s Colombia operations rose 7.1% in 2023 to 29.5 million metric tons, while exports declined by 2.6% to 27 ...
Friday, 19 January 24
CHINA'S 2023 COAL OUTPUT HITS RECORD HIGH - REUTERS
China’s coal output reached a record high in 2023, data from the statistics bureau showed on Wednesday, amid an ongoing focus on energy secur ...
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- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Samtan Co., Ltd - South Korea
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Holcim Trading Pte Ltd - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- PNOC Exploration Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- South Luzon Thermal Energy Corporation
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- PTC India Limited - India
- Tamil Nadu electricity Board
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Bhatia International Limited - India
- White Energy Company Limited
- Globalindo Alam Lestari - Indonesia
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Medco Energi Mining Internasional
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Deloitte Consulting - India
- PetroVietnam Power Coal Import and Supply Company
- Sree Jayajothi Cements Limited - India
- Mercator Lines Limited - India
- Bangladesh Power Developement Board
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Sakthi Sugars Limited - India
- Rio Tinto Coal - Australia
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- VISA Power Limited - India
- Siam City Cement - Thailand
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Economic Council, Georgia
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- The University of Queensland
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Wood Mackenzie - Singapore
- Sojitz Corporation - Japan
- Thai Mozambique Logistica
- GN Power Mariveles Coal Plant, Philippines
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- Global Green Power PLC Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Kapuas Tunggal Persada - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Jorong Barutama Greston.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- Marubeni Corporation - India
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Planning Commission, India
- Bhushan Steel Limited - India
- Directorate Of Revenue Intelligence - India
- Indogreen Group - Indonesia
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- CIMB Investment Bank - Malaysia
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- Madhucon Powers Ltd - India
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Petron Corporation, Philippines
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- MS Steel International - UAE
- Vizag Seaport Private Limited - India
- The Treasury - Australian Government
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- Merrill Lynch Commodities Europe
- Bukit Baiduri Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Energy Development Corp, Philippines
- Port Waratah Coal Services - Australia
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Metalloyd Limited - United Kingdom
- Commonwealth Bank - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Ministry of Mines - Canada
- Vedanta Resources Plc - India
- Billiton Holdings Pty Ltd - Australia
- Leighton Contractors Pty Ltd - Australia
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