Supply concerns re-emerges
Domestic priority remains strong
We are attending Asia's leading coal conference, CoalTrans, where Day 1 revealed a recurring theme of last year. That is, supply constraints. It is clear that coal and
power producers are once again feeling the pressure from infrastructure bottlenecks, while regulators reiterate their domestic priority commitments
Supply and demand is tightening
Asian thermal coal prices are once again strengthening on account of distribution bottlenecks. More specifically, the Newcastle vessel queue is once again increasing, while several infrastructure projects are delayed due to lack of financing. Meanwhile, China has returned to net importer status, while India's coal import growth is now the highest in the world. Consequently, coal prices are once again finding momentum.
Indo off take is a priority
Further to the government's intention to allocate more coal to the domestic market (DMO), the Ministry of Mining intend to quantify individual miners’ domestic sales requirements in June. We believe producers will be required to allocate 25-30 pct of volumes domestically at a 10-20 pct discount to the international price.
Another Crash Program is imminent
In order to improve upon Indonesia's 65 pct electricification ratio, the government is implementing another 10,000MW power program to be completed by 2014-15.
State electricity producer, PLN, estimates a 66mt coal off-take by 2012 from c32mt currently (not including other industries)
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