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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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Monday, 08 January 24
KOSPO TO BUY 80000 MT OF INDONESIAN LOW CALORIFIC VALUE COAL FOR FEB 2024
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for the supply of Indonesian Low Calorific Value Coal from qualified suppliers for Korean ...
Monday, 08 January 24
SEABORNE TRADE REACHES 12.4BN TONNES - CLARKSONS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
Monday, 08 January 24
CAPESIZES START THE NEW YEAR ON POSITIVE NOTE - BALTIC EXCHANGE
Capesize
This week the capsize market has been marked by a mix of activities and challenges. Despite a slow start following the Christmas and N ...
Friday, 05 January 24
MORGAN STANLEY SEES LOWER OIL PRICES IN 2024 ON OVERSUPPLY CONCERNS - REUTERS
Morgan Stanley sees Brent crude prices anchored near $80 per barrel in the first half in 2024 before declining towards the end of the year as it ex ...
Friday, 05 January 24
INDIA'S COAL OUTPUT RISES NEARLY 11 PC IN DEC TO 92.87 MT - PTI
India’s coal production increased by 10.75 per cent to 92.87 million tonne in December 2023 as compared to the year-ago period, an official s ...
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- Bukit Makmur.PT - Indonesia
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Global Business Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- Australian Coal Association
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Standard Chartered Bank - UAE
- Tata Chemicals Ltd - India
- Planning Commission, India
- Tamil Nadu electricity Board
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- Renaissance Capital - South Africa
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Mineral Development Corp Ltd - India
- LBH Netherlands Bv - Netherlands
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- London Commodity Brokers - England
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Grasim Industreis Ltd - India
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- VISA Power Limited - India
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Independent Power Producers Association of India
- Altura Mining Limited, Indonesia
- White Energy Company Limited
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Kobexindo Tractors - Indoneisa
- Xindia Steels Limited - India
- Heidelberg Cement - Germany
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Rio Tinto Coal - Australia
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- Baramulti Group, Indonesia
- Carbofer General Trading SA - India
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Georgia Ports Authority, United States
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Star Paper Mills Limited - India
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- CIMB Investment Bank - Malaysia
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Indian Energy Exchange, India
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- Wilmar Investment Holdings
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- MS Steel International - UAE
- Aboitiz Power Corporation - Philippines
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Riau Bara Harum - Indonesia
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Singapore Mercantile Exchange
- Rashtriya Ispat Nigam Limited - India
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Medco Energi Mining Internasional
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- TNB Fuel Sdn Bhd - Malaysia
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