As per Andrew Driscoll’s email, JFY09/10 thermal coal benchmark price might have been settled between Australia and Japan. We understand that McCloskey's newswire are reporting U$72-73/tonne, while other services suggest U$70-72/tonne.
This represents a 42% YoY decline from US$125/tonne. It compares to consensus forecasts of US$75-80/t while our forecast is at US$80/t. Nonetheless, expectations were falling as spot prices have decreased to US$60/tonne hence we think this should be interpreted positively.
There should be minimal adjustment to our 2009 earnings forecast for companies with high portion of contracted tonnage, including ITM and Adaro that have 60% and 70% contracted volume this year, respectively. Less impact on company like Bukit Asam that has high portion, 60%, of domestic sales.
We also believe there is minimal downside risk to our dividend for ITM as our earnings forecast have implicitly assume US$70/t benchmark hence the 16% yield looks intact.
We think Bumi has the highest earnings risk as it has only contracted 25% of its volume this year.
We might however tone down our 2010 forecasts by quite a bit as we are reassessing our 2010 contract price forecast.
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