India’s Electricity Crisis Boosts Coal Prices, These Are Recommended Stocks for Coal Issuers

ILLUSTRATION. Heavy equipment operates at a coal mine owned by PT Bukit Asam Tbk (PTBA).

Reporter: Akhmad Suryahadi | Editor: Tendi Mahadi

KONTAN.CO.ID – JAKARTA. The electricity crisis that hit India also raised coal prices. This is reflected in the reference coal price (HBA) in June 2022, which increased 17% per tonne to US$ 323.91 per tonne.

According to the Ministry of Energy and Mineral Resources, the Government of India has increased the number of coal imports in line with the tight supply of coal from domestic producers for power plants. In addition, the increase in HBA in June was also influenced by conditions in China’s coal demand.

Not only HBA, the price of ICE Newcastle coal for the July 2022 trading contract is still at a fairly high level, at US$ 390.75 per tonne.

This increase also brings fresh air to coal issuers, one of which is PT Bukit Asam Tbk (PTBA). Even though PTBA has to supply coal to the domestic market, where the price is below the global reference price, PTBA is still considered to be enjoying the increase in coal prices. Because PTBA has increased mixed selling price higher.

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This is because there is an increase in the portion of coal sales to the export market during the first quarter of 2022 mixed selling pricewhich tends to be higher because the selling price is not stamped,” explained RHB Sekuritas Indonesia analyst Fauzan Luthfi Djamal to Kontan.coi.id, Monday (6/6).

Fauzan said that this state-owned issuer captured the momentum of the increase in coal selling prices by increasing the proportion of its export sales to 54 percent, from previously only 31% in the first quarter of 2021. In the end, the sales price achieved by PTBA was better, which was Rp. 1.16 million. per tonne or up 73% year-on-year (YoY).

This leads to an expansion of profit margins or net profit margin (NPM), which is 28% from the previous only 13%.

Sucor Sekuritas analyst Andreas Yordan Tarigan assessed that the crisis condition in India could certainly be an opportunity for Indonesian coal issuers. This opportunity is given the limited additional supply of coal from Australia due to disruptions supply due to heavy rains and recent floods.

Andreas’ calculations, at least throughout this year India’s coal supply will be in a tight condition. One of the main causes of supply shortage in India the temperature is much hotter than usual. The temperature rose from 35 degrees to 45 degrees Celsius.

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Existence heat dome likely to prolong the heat in the country. Coal imports that have been carried out previously have not been able to meet the needs.

According to him, India’s coal imports rose rapidly to around 23 million tons in March 2022, from only about 18 million in March last year. Even though imports have increased, in fact, supply shortages still persist.

On the other hand, the European Union, Japan and South Korea will have to look for additional coal to substitute supply coal from Europe. Last year, these countries imported 100 million tons of coal from Russia.