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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, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- GN Power Mariveles Coal Plant, Philippines
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- Bayan Resources Tbk. - Indonesia
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Wilmar Investment Holdings
- Siam City Cement PLC, Thailand
- Essar Steel Hazira Ltd - India
- Coal and Oil Company - UAE
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- Kapuas Tunggal Persada - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- Savvy Resources Ltd - HongKong
- Parry Sugars Refinery, India
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Siam City Cement - Thailand
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Wood Mackenzie - Singapore
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Sindya Power Generating Company Private Ltd
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Star Paper Mills Limited - India
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- Xindia Steels Limited - India
- Sinarmas Energy and Mining - Indonesia
- London Commodity Brokers - England
- Australian Commodity Traders Exchange
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Semirara Mining Corp, Philippines
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Deloitte Consulting - India
- Australian Coal Association
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Price Waterhouse Coopers - Russia
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Sojitz Corporation - Japan
- Global Green Power PLC Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- GVK Power & Infra Limited - India
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- Bukit Makmur.PT - Indonesia
- Parliament of New Zealand
- Bhatia International Limited - India
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Standard Chartered Bank - UAE
- Mjunction Services Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Vizag Seaport Private Limited - India
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Goldman Sachs - Singapore
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Energy Development Corp, Philippines
- IEA Clean Coal Centre - UK
- India Bulls Power Limited - India
- The State Trading Corporation of India Ltd
- Metalloyd Limited - United Kingdom
- SMG Consultants - Indonesia
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Mintek Dendrill Indonesia
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Billiton Holdings Pty Ltd - Australia
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Straits Asia Resources Limited - Singapore
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Tamil Nadu electricity Board
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- San Jose City I Power Corp, Philippines
- Anglo American - United Kingdom
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- SMC Global Power, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Ministry of Mines - Canada
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
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