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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, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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- Global Green Power PLC Corporation, Philippines
- Indian Energy Exchange, India
- Eastern Energy - Thailand
- Lanco Infratech Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Videocon Industries ltd - India
- MS Steel International - UAE
- Kaltim Prima Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- OPG Power Generation Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- Central Electricity Authority - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Commonwealth Bank - Australia
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- Heidelberg Cement - Germany
- GN Power Mariveles Coal Plant, Philippines
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- Samtan Co., Ltd - South Korea
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- Planning Commission, India
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- Energy Link Ltd, New Zealand
- The University of Queensland
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Australian Coal Association
- Ministry of Transport, Egypt
- Indo Tambangraya Megah - Indonesia
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Uttam Galva Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- VISA Power Limited - India
- Merrill Lynch Commodities Europe
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Globalindo Alam Lestari - Indonesia
- The Treasury - Australian Government
- Vijayanagar Sugar Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- White Energy Company Limited
- Kalimantan Lumbung Energi - Indonesia
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Chamber of Mines of South Africa
- New Zealand Coal & Carbon
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Alfred C Toepfer International GmbH - Germany
- Bukit Makmur.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Energy Development Corp, Philippines
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Ministry of Mines - Canada
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- IEA Clean Coal Centre - UK
- Baramulti Group, Indonesia
- PTC India Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Sakthi Sugars Limited - India
- Independent Power Producers Association of India
- Tata Chemicals Ltd - India
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- SMG Consultants - Indonesia
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Australian Commodity Traders Exchange
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bhatia International Limited - India
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Deloitte Consulting - India
- Kepco SPC Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- GMR Energy Limited - India
- Bayan Resources Tbk. - Indonesia
- CNBM International Corporation - China
- Mercator Lines Limited - India
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Grasim Industreis Ltd - India
- Borneo Indobara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ASAPP Information Group - India
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Renaissance Capital - South Africa
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- Marubeni Corporation - India
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