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Despite Indonesian President Joko Widodo having signed a regulation that will lead to a relatively cheap coal price for domestically-sold coal under the domestic market obligation, shares of Indonesian coal miner Adaro Energy rose 1.39 percent to IDR 2,190 a piece on Thursday (08/03).
Indonesian President Joko Widodo signed Government Regulation No. 8/2018 on the Implementation of Mineral and Coal Mining Business Activities (Regulation No. 8/2018) on Wednesday March 7th, 2018. This implies that the Indonesian government changed the price mechanism for coal that is sold at home under the domestic market obligation (DMO) scheme. Through the DMO, the central government forces local coal mining companies to sell part of their coal production at home.
Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA) touched a multi-year high in March 2018. The HBA, which is determined by Indonesia's Energy and Mineral Resources Ministry on a monthly basis (and which is based on several global and domestic indexes), rose 1.2 percent month-on-month (m/m) to USD $101.86 per metric ton in March 2018, its highest position since May 2012.
After receiving criticism from various stakeholders, the Indonesian government reportedly decided to postpone the implementation of a new regulation that requires all domestic coal, palm oil and rice exporters to use ships that are owned by local sea shipping companies and requires them to use domestic insurance.
Borneo Olah Sarana Sukses, an Indonesia-based coal mining company, set its share price at IDR 400 a piece (approx. USD $0.03) for the initial public offering (IPO) on the Indonesia Stock Exchange. The coal miner will offer 400 million shares, or 28.57 percent of the company's total share equity, to the public through the corporate move. As such, the company is set to raise IDR 160 billion (approx. USD $11.8 million).
Indonesian coal mining company Borneo Olah Sarana Sukses will soon conduct its initial public offering (IPO) on the Indonesia Stock Exchange. The company plans to offer 400 million shares, equivalent to 28.57 percent of its share equity, to the public through the corporate move. Listing on the local exchange is scheduled for 21 February 2018.
Coal demand remains high, particularly due to robust demand from China, the world's largest coal importer. This brings the projection for the full-year 2018 coal price to the range of USD $98.50 - $107.00 per metric ton. So far this year the coal price (ICE NewCastle Coal January 2018) surged around 4 percent, while in full-year 2017 the price had surged 57.09 percent.
Domestic coal demand in Indonesia is estimated - by the Indonesian government - to reach 114.51 million tons in 2018, up around 6 percent from estimated demand in 2017. Bambang Gatot, Director General for Coal and Minerals at the Energy and Mineral Resources Ministry, said coal-fired power plants remain the biggest domestic consumers of coal.
Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA) - set on a monthly basis by Indonesia's Energy and Mineral Resources Ministry (and which is based on domestic and international coal indices) - fell 0.8 percent to USD $94.04 per metric ton in December 2017. This decline is attributed to falling coal demand in China where authorities decided to curb coal imports.
Coal imports into China are expected to recover in the last two months of the year and therefore various analysts say the coal price is able to touch beyond USD $97 per ton before the year-end. In October coal imports into China - the world's largest coal importer - had fallen by a whopping 24 percent (m/m) to 21.3 million tons due to the availability of plenty domestic coal supplies.
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Amid rising mining commodity prices, Indonesian coal mining company Adaro Energy saw its share price surge at the start of 2018. The mining index is actually the best-performing index so far this year in Indonesia, rising 13.58 percent since the start of the year. Being a mining company - or more precisely an energy company (as it recently entered the power generation sector) - Adaro Energy is among the major beneficiaries.
A number of listed coal mining companies on the Indonesia Stock Exchange are eager to raise production capacity amid attractive coal prices. One way to boost production capacity is through the acquisition of other coal miners. Indonesia's key thermal coal price (Harga Batubara Acuan, HBA) - the monthly benchmark price that is set by the Energy and Mineral Resources Ministry - rose slightly to USD $94.80 per metric ton in November 2017.
Foreign exchange earnings are important assets for a national economy. Therefore, many nations have recently been taking a much more protectionist approach vis-à-vis trade in an effort to strengthen their trade positions, generate trade surpluses, hence see the inflow of more foreign exchange earnings. Foreign exchange assets support a stable local currency as well as economy.
Sales of United Tractors, the largest distributor of heavy equipment in Indonesia and part of the Astra Group, continue to climb in 2017. In fact, the management of United Tractors now expects full-year 2017 sales to exceed their initial forecast. Sara Loebis, Corporate Secretary of United Tractors, said the company has therefore raised its forecast for full-year heavy equipment unit sales from 3,000 to 3,200 units.
Overall, low crude oil prices are problematic for stock markets as low prices indicate the world economy is not expanding on full throttle. This curbs investors' risk appetite. Particularly those companies that are active in the oil industry (or in related industries) will likely face declining share prices. However, there are also positive effects of low oil prices. For example consumers' purchasing power should improve because prices at the gas pump are lower, while some companies can curb operational costs. Hence, consumer and transportation stocks should actually benefit from low oil prices.
The recently rallying coal price is a major boost for leading Indonesian coal miner Adaro Energy. Mirae Asset Sekuritas noted in a new report that Adaro Energy is in a great position to book higher corporate earnings in the years ahead because the miner's structure (and subsidiaries) are highly integrated and therefore it can more-or-less control the costs and risks in each business stage.
The soaring benchmark thermal coal price of the Indonesian government (called harga batubara acuan, abbreviated HBA), which is set (on a monthly basis) by the Energy and Mineral Resources Ministry, should boost earnings of listed Indonesian coal miner Tambang Batubara Bukit Asam in 2017. The HBA price nearly doubled to USD $102 per metric ton in December from the year-start. Besides the rising coal price, the company should also see improving corporate earnings due to its expected rising sales volume.
The sharply rallying coal price in the second half of 2016 and its strong cash position (a sign of financial strength and liquidity) is the right recipe for listed Indonesian coal miner Harum Energy to post strong corporate earnings this year. In fact, Indonesian securities company Trimegah Securities believes that Harum Energy is the coal miner that will benefit the most of all listed coal miners on the Indonesia Stock Exchange (IDX) because 95 percent of its coal sales is sold on the spot market.
Indonesia's November 2016 coal price broke a record. The nation's benchmark thermal coal price (locally known as the Harga Batubara Acuan, HBA) - a monthly price set by Indonesia's Energy and Mineral Resources Ministry and which is based on domestic and international coal indices - jumped 22.9 percent month-on-month (m/m) to USD $84.89 per metric ton this month, the highest monthly HBA price rise ever recorded. Compared to the start of the year, Indonesia's coal price has now risen 59.6 percent, the sixth straight monthly gain. But is this reason for euphoria?
Many Indonesian coal miners that are listed on the Indonesia Stock Exchange (IDX) have seen their shares surge in the past couple of months supported by the recovering coal prices. Indonesia's thermal coal price (in Indonesian: Harga Batubara Acuan, abbreviated HBA), a monthly price set by Indonesia's Energy and Mineral Resource Ministry and which is based on domestic and global coal prices, soared from USD $50.92 per metric ton in February 2016 to USD $63.93 per ton in September.
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