Indonesia steam coal exports prospect have been based on structural demand growth from China, India and Domestic Power Plant, and this Report is addressing India import shortage as soon as 2 years from now! CS is assuming average benchmark thermal coal prices of US$95/t 2010F (in line with NEWC weekly spot FOB $93.10/t as of August 6th), $100/t 2011F, $90/t 2012F, $85/t 2013F and $80/t 2014F onwards. Our Top Picks in coal sectors and Indonesia market are UNTR, ADRO and ITMG!
· India Coal Research Team (Report attached): We forecast acute coal shortages in India very soon. Coal demand in India is expected to grow by 1.2 bn tonnes per annum over the next ten years. With Coal India planning to add only ~300 mn tpa in supply, domestic captive mining and imports will need to rise to bridge the gap. We expect both to increase sharply, but not enough, leaving India short of coal as soon as two years from now.
· Constraints in captive mining as well as imports. Captive mining is growing rapidly, but the ~350mn tpa addition we expect by FY20 will be far short of the 800 mn tpa needed. In addition to delays in environmental clearances and land acquisition, and the .go. versus .no go. debate, 90% of the allocated coal blocks being in four Naxalite affected states is likely to hurt. Imports would thus need to be ~500mn tpa: an impossible target given limited port capacity and infrastructure to move coal to power plants, which are mostly located away from the coast
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