China proposes import ban on low CV coal by Macquire (RX)
According to a report from IHS McCloskey earlier today, China's National Energy Administration (NEA) has released a draft regulation proposing to ban the import of thermal coal with calorific value less than 4,544 KCa; (NAR) following reported meetings with coal and power companies last week. The NEA is currently soliciting responses to the draft guidelines. This latest development will add further pressure to the Indonesian coal sector given the Chinese regulatory overhang is likely to persists at least in the near term, and raises the possibilities of protectionist policy changes from China in the medium term amidst a softer commodity price environment. we therefore maintain a neutral call on the Indonesian coal sector, with a soft operating outlook now clouded by major regulatory risk from China. While higher CV coal producers might provide a relative safe haven, at this stage the sector remains unattractive on a risk/reward basis in our view. Key implications : more pressure for Indonesian coal producers likely, given they supply ~100mt of low grade coal to china Potential losers : the key producers to be impacted would be : $BUMI (Arutmin coal), $ADRO (Wara coal), $INDY (Kideco) and $KKGI. Potential Winners : $PTBA, $ITMG, and $HRUM may all benefit given their higher grade of exports which may be bid for by chinese buyers. The potential for a low CV import ban from china has been discussed previously, however this appears to be the strongest step taken thus far by NEA. We note 100mt of displaced coal accounts for almost 25% of national production which would need to find a home at potentially loss-making prices and eventually be consolidated out of the market. The coal sector contributes ~4% of indonesian GDP kalau memang benar disahkan, siap2 saja tuh buat potential losers untuk tambah turun sahamnya. Join http://stockbit.com/ - Social Network for Indonesian Stock Traders
