Coal news and updates

Bumpy goings for local coal miners

Publicly listed coal miners continue to see incomes shrink amid a decline in the global demand for coal, which has dragged down prices in recent years.

State-run miner Bukit Asam and major coal producer Adaro Energy both reported significant reductions in their bottom lines during the first three months of the year, with the former booking a drop in net profits of 36.5 percent year-on-year (yoy) to Rp 330.34 billion (US$25.47 million).

Adaro, meanwhile, saw its net profit halved from the $128.75 million it booked between January and March 2014 to $59.06 million in the same period this year.

In press releases, both companies said low prices and flagging demand were behind their lackluster first quarter (Q1) performance.

Global coal price-benchmark Newcastle showed a 2.7 percent quarter-on-quarter increase during the first three months of the year, while Indonesia’s coal price reference (HBA) rose by 6.14 percent from January to March, to around $68 per ton.

But the increases could not make up for the more than 10 percent drop in coal prices over the last year triggered by a decline in Chinese demand — the world’s largest coal consumer.

“A higher price benchmark did not necessarily translate into better performances for companies, as the price was still generally low and exported production shipped mostly to China, demand from which is slowing on the back of the economic slowdown,” BNI Securities analyst Viviet S. Putri said.

Bukit Asam saw its average selling price (ASP) slip by 4.46 percent during the first quarter compared to the same period last year, while Adaro booked a 14 percent drop in its ASP.

To cope with the bearish coal market, both companies have pledged to resort to an efficiency strategy to maintain profitability.

“The first quarter is usually a difficult time for commodity companies, with the rainy season leading to low production,” Viviet said, adding she was upbeat that miners would book better performances in upcoming quarters.

“But whether the performance will be better than the previous year will depend on the government’s policy to open new markets and to accelerate infrastructure projects, especially on mine-mouth power plants,” she said.

Viviet added that efficiency strategies alone could not solve the economic woes, and that diversifying into the power plant industry was “a must” to generate additional income and create a market to absorb a glut in coal supply.

Bukit Asam has set up a new subsidiary, Bukit Energi Investama, to manage its energy investments. The company has cooperated with the China Huadian Corporation to work on 2x600 MW power plant in its South Sumatra concession, scheduling a financial closing for the $1.59 billion power plant in the second half of the year and to begin
commissioning the project in 2019.

Adaro, meanwhile, has partnered with China Shenhua Overseas and Development to develop a 2x300 megawatt mine-mouth coal-fired power plant in its coal mine in East Kalimantan.

Bukit Asam’s production in the first quarter stood at 3.7 million tons, or some 2 percent lower than over the same period last year, while Adaro saw its output decline by around 6 percent to 13.16 million tons.

Adaro also experienced a revenue-drop of around 16 percent to $710.95 million, Bukit Asam, meanwhile, saw revenue rise by around 6.15 percent to Rp 3.28 trillion on the back of higher sales volume, supported by purchases from third parties.

source: http://www.thejakartapost.com