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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, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Ministry of Mines - Canada
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- SMG Consultants - Indonesia
- Ministry of Finance - Indonesia
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Marubeni Corporation - India
- Minerals Council of Australia
- Jaiprakash Power Ventures ltd
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- ASAPP Information Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Star Paper Mills Limited - India
- Sree Jayajothi Cements Limited - India
- New Zealand Coal & Carbon
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Australian Coal Association
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
- Madhucon Powers Ltd - India
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Bangladesh Power Developement Board
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- London Commodity Brokers - England
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Kalimantan Lumbung Energi - Indonesia
- Uttam Galva Steels Limited - India
- South Luzon Thermal Energy Corporation
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Indian Energy Exchange, India
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Gujarat Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- The University of Queensland
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- VISA Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Sarangani Energy Corporation, Philippines
- Altura Mining Limited, Indonesia
- Simpson Spence & Young - Indonesia
- Intertek Mineral Services - Indonesia
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Interocean Group of Companies - India
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Neyveli Lignite Corporation Ltd, - India
- Sakthi Sugars Limited - India
- Planning Commission, India
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Global Business Power Corporation, Philippines
- SMC Global Power, Philippines
- Semirara Mining Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Rio Tinto Coal - Australia
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Goldman Sachs - Singapore
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- India Bulls Power Limited - India
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Karaikal Port Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- White Energy Company Limited
- Agrawal Coal Company - India
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Heidelberg Cement - Germany
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Asmin Koalindo Tuhup - Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Ministry of Transport, Egypt
- Bhatia International Limited - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- MS Steel International - UAE
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