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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, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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- Trasteel International SA, Italy
- Borneo Indobara - Indonesia
- Tamil Nadu electricity Board
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- PowerSource Philippines DevCo
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- Mjunction Services Limited - India
- Orica Australia Pty. Ltd.
- VISA Power Limited - India
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Bangladesh Power Developement Board
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- TeaM Sual Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Videocon Industries ltd - India
- Electricity Generating Authority of Thailand
- Indian Oil Corporation Limited
- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Toyota Tsusho Corporation, Japan
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Interocean Group of Companies - India
- Sakthi Sugars Limited - India
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Economic Council, Georgia
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Metalloyd Limited - United Kingdom
- Indika Energy - Indonesia
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Sindya Power Generating Company Private Ltd
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- PNOC Exploration Corporation - Philippines
- Renaissance Capital - South Africa
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Global Business Power Corporation, Philippines
- Romanian Commodities Exchange
- Meenaskhi Energy Private Limited - India
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- Energy Link Ltd, New Zealand
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Eastern Energy - Thailand
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Kartika Selabumi Mining - Indonesia
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Ministry of Transport, Egypt
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Indian Energy Exchange, India
- Aditya Birla Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining Corp, Philippines
- South Luzon Thermal Energy Corporation
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Posco Energy - South Korea
- Makarim & Taira - Indonesia
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Goldman Sachs - Singapore
- Malabar Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Vedanta Resources Plc - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Coal Association
- Ministry of Mines - Canada
- Bayan Resources Tbk. - Indonesia
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Uttam Galva Steels Limited - India
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Deloitte Consulting - India
- Directorate General of MIneral and Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Cement Manufacturers Association - India
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Central Electricity Authority - India
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- OPG Power Generation Pvt Ltd - India
- MS Steel International - UAE
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Coalindo Energy - Indonesia
- The University of Queensland
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Finance - Indonesia
- Gujarat Sidhee Cement - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Coal and Oil Company - UAE
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Power Finance Corporation Ltd., India
- Sinarmas Energy and Mining - Indonesia
- Jaiprakash Power Ventures ltd
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- PTC India Limited - India
- Thiess Contractors Indonesia
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
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