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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, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- Chamber of Mines of South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- London Commodity Brokers - England
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parliament of New Zealand
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- The Treasury - Australian Government
- Borneo Indobara - Indonesia
- IEA Clean Coal Centre - UK
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Merrill Lynch Commodities Europe
- Ambuja Cements Ltd - India
- South Luzon Thermal Energy Corporation
- SMC Global Power, Philippines
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
- Carbofer General Trading SA - India
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Central Electricity Authority - India
- Sinarmas Energy and Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- White Energy Company Limited
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Samtan Co., Ltd - South Korea
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- Makarim & Taira - Indonesia
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- Singapore Mercantile Exchange
- Siam City Cement PLC, Thailand
- Manunggal Multi Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Intertek Mineral Services - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Economic Council, Georgia
- Central Java Power - Indonesia
- Georgia Ports Authority, United States
- Globalindo Alam Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Kobexindo Tractors - Indoneisa
- Latin American Coal - Colombia
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Minerals Council of Australia
- Energy Link Ltd, New Zealand
- McConnell Dowell - Australia
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- GVK Power & Infra Limited - India
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Videocon Industries ltd - India
- ASAPP Information Group - India
- Heidelberg Cement - Germany
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Meralco Power Generation, Philippines
- Attock Cement Pakistan Limited
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- Bhushan Steel Limited - India
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Eastern Coal Council - USA
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- GAC Shipping (India) Pvt Ltd
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Bangladesh Power Developement Board
- Krishnapatnam Port Company Ltd. - India
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Romanian Commodities Exchange
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sree Jayajothi Cements Limited - India
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Coalindo Energy - Indonesia
- Africa Commodities Group - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- GMR Energy Limited - India
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