We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Thursday, 29 September 11
INDONESIA'S MINERS FACE AN UNCERTAIN FUTURE - RUPERT WALKER
 An evolving regulatory framework for the country's minerals industry could threaten its profitability and stifle investment.
The five-year surge in commodity prices has been kind to Indonesia. Certainly, there were shocks to both prices and volumes in late 2008, but the wealth created by the country's primary exports during that period has been sufficient to sustain its economic growth and underpin domestic consumption.
It has also given support to a resurgence of nationalist sentiment, reflected in legislation and the formation and implementation of new regulations. Understandably for a country that is growing more affluent and catching up with its regional neighbours, Indonesia no longer intends to be simply a repository for other countries' raw materials inputs. Instead, it plans to exploit its resources for its own burgeoning industrial and manufacturing base.
Also, as Indonesia's energy policy moves toward greater domestic coal usage, producers will be forced to negotiate new contracts at official prices with local buyers.
Earlier this year, the government said that it will ban exports of raw commodities by 2014. Miners would need to build smelters to add value to exports. For instance, ferronickel rather than the raw metal would be exported and coal would have to be blended to reach 5,600 kilo calories before it could be sold abroad.
The catalyst for the shift was the 2009 Mining Law which replaced the "Contract of Work" and "Coal Contract of Work" system in use since 1967. The aim is to stimulate the development of the country's mineral resources and help support broader-based economic growth. The 2009 act provides a basic framework, but government regulations from later that year, and in 2010, provided some clarity and are now expected to gather pace.
However, there are worries that the law will backfire and that these regulations will stifle future investment and damage the existing operations of Indonesia's miners.
"Indonesia's mining industry is undergoing a regulatory overhaul that is likely to weaken the operating and financial performance of domestic mining companies," warned Standard and Poor's Xavier Jean.
Standard & Poor’s argued in a report issued this summer that besides increasing operating uncertainty for Indonesian mining companies, the new regulations may also make the industry less attractive to foreign investors.
For instance, the mining law states that several government and ministerial regulations will need to be issued before its impact can be understood. There are also conflicts between mining operations and forestry regulations, overlapping authority between central and local governments and contradictory tax rules. Indeed, "a more clear legal framework would give investors more assurance about the predictability of policies," agreed Wellian Wiranto, Asia economist at HSBC, in a July research report. But he said he hoped that the evolving regulations "will only be implemented after intense feedback from industry players".
Domestic market obligations
It is likely some of the feedback will be about who bears an inordinate share of the burden. Some market participants note, for example, that the provisions on domestic market obligation (DMO) and reference pricing, where miners must sell a portion of the production domestically at a minimum reference price before exporting, will affect coal producers more than metals producers because the domestic demand for coal is higher than for metal ore. Given current and expected domestic coal consumption trends, Standard & Poor's estimated that the DMO could average 20% to 25% of the industry's annual coal production during the next five years, although this proportion could increase above 30% as Indonesia shifts its domestic energy mix from oil to coal during the next decade.
DMO and minimum reference price regulations could increase uncertainty about revenues and cash flows. If reference prices are set too low, it could lower the revenues for producers (given the lack of a domestic competitive market), reduce margins, and increase opportunity costs. If they are too high, they could hurt the government-owned electricity generator Perusahaan Listrik Negara (PLN), the largest domestic coal buyer, and hence make coal producers vulnerable to customer concentration risk.
Worst affected among coal miners will be those with small domestic sales because they will need to negotiate local contracts from scratch and rapidly increase local sales to meet regulatory requirements. Bayan Resources, with 2% of domestic sales last year, could fall into this category, and even Bumi Resources, whose domestic sales have been historically around 10%, might be exposed.
Meanwhile, miners now negotiating off-take contracts with PLN will be vulnerable to price risk. For example, Bukit Asam generated 64% of its revenues domestically in 2010 and is currently in negotiation for an off-take contract with PLN for 265 million tonnes of coal during the next 20 years.
Although the mining law grandfathers existing coal contracts of work, these new regulations will apply to both existing contracts and prospective mining investments. As S&P's Jean pointed out: "the provisions on DMO and reference pricing [and] domestic market processing...are likely to have the greatest impact on the Indonesian mining sector."
But, Standard & Poor's expects the government will take a few years "to calibrate the pricing system and balance producers' and consumers' interests", based on the experience from the implementation of oil and gas DMO in Indonesia. The regulatory environment is still evolving, after all, so when rules are ultimately enforced they tend to look different from their original forms.
A salutary warning
The allusion to Indonesia's oil industry is pertinent, however. The country was a substantial oil exporter until turning into an importer in 2004, and then finally leaving Opec in 2009.
Analysts blame a lack of investment in oil exploration. In the 1990s, Indonesia pumped out more than 1.5 million barrels a day; this year the average daily output is 916,000, well below the government's target of 970,000, according to HSBC's Wiranto. The World Bank calculated that investment in oil exploration is now less than half the $1 billion spent each year before the Asian financial crisis in the late 1990s.
Wiranto pointed out that Indonesia's resource riches are simply not matched by investment conditions in the commodity sector. He referred to a survey of international mining companies by the Fraser Institute that found that the "perceived lack of transparency in the legal process and the risk of regulatory duplication and inconsistencies continue to act as deterrents to more substantial investment".
Indonesia's production-to-reserves ratio for coal and copper is half that of its competitors (Australia, Chile and China), according to the World Bank. A poor investment environment could mean that the country's proven mineral resources are actually vastly underestimated.
So, it would be a pity if regulatory uncertainty and onerous obligations again prevent Indonesia from fully exploiting the benefits of its natural riches. Especially, given the laws were introduced to spur growth not cripple an industry. (By Rupert Walker)
About Rupert Walker
Rupert Walker is a senior writer and has been a financial journalist based in Hong Kong for three years. Previously he was employed by Asiamoney, and has written for various magazines and newspapers on assignments in Central Europe, Russia and Africa. Rupert was also a fund manager in London – investing in emerging markets for Govett Investment, working in capital markets for SG Warburg and Goldman Sachs, and setting up a capital markets business in Singapore for NatWest. He has a BA/MA in Modern History from Keble College, Oxford University and an MA in Anthropology from SOAS, London University. He is also a CFA charterholder.
This story was first published in FinanceAsia
The views and opinions / conclusion expressed on this article is purely the writers’ own.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Monday, 10 October 11
MOZAMBIQUE CHANNEL TO BE THE NEW PIRACY HOTSPOT FOR THIS YEAR SAYS MARITIME SECURITY EXPERT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The Mozambique Channel, as well as the entrance to the Persian Gulf, are expected to become some of the new pirate hotspots for piracy, says Richard ...
Sunday, 09 October 11
FREIGHT MARKET ENDED WITH A POSITIVE DIRECTION - VISTAAR
COALspot.com - The market ended with a positive note with all the segments up except for handy size. The biggest gainer was Panamax index up by 11 p ...
Saturday, 08 October 11
INDONESIAN MINER PLANS $167M IPO TO FUEL SUMATRA COAL BOOM - JG
The Jakarta Globe reported that, coal miner Atlas Resources aims to raise as much as Rp 1.5 trillion ($167 million) in an initial public offering to ...
Friday, 07 October 11
MINING REGULATIONS , OBSTACLES AND GROWTH : INDIA VS INDONESIA - SUNIL K KUMBHAT
COALspot.com - The Govt of India has passed long pending Mines & Minerals (Regulation and Development) Bill, 2011, which seeks to replace ...
Friday, 07 October 11
$100M FOR EXPANSION INTO KALIMANTAN MINING: AKR
The Jakarta Globe, one of the leading English news paper in Indonesia reported that, AKR Corporindo, a fuel and chemical distributor, has set aside ...
|
|
|
Showing 5041 to 5045 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Samtan Co., Ltd - South Korea
- Savvy Resources Ltd - HongKong
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Trasteel International SA, Italy
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Intertek Mineral Services - Indonesia
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Electricity Generating Authority of Thailand
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Altura Mining Limited, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Goldman Sachs - Singapore
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- PetroVietnam Power Coal Import and Supply Company
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Toyota Tsusho Corporation, Japan
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Planning Commission, India
- Global Coal Blending Company Limited - Australia
- Krishnapatnam Port Company Ltd. - India
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Interocean Group of Companies - India
- Thai Mozambique Logistica
- New Zealand Coal & Carbon
- Asmin Koalindo Tuhup - Indonesia
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Meralco Power Generation, Philippines
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Riau Bara Harum - Indonesia
- Central Java Power - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Standard Chartered Bank - UAE
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Bank of Tokyo Mitsubishi UFJ Ltd
- SN Aboitiz Power Inc, Philippines
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- Aboitiz Power Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Wilmar Investment Holdings
- White Energy Company Limited
- Latin American Coal - Colombia
- Eastern Coal Council - USA
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Siam City Cement - Thailand
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- MS Steel International - UAE
- Tata Chemicals Ltd - India
- Semirara Mining Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Attock Cement Pakistan Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement PLC, Thailand
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Aditya Birla Group - India
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Straits Asia Resources Limited - Singapore
- Bhoruka Overseas - Indonesia
|
| |
| |
|
