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Tuesday, January 18, 2011

Only 15 pct of Australia Queensland coal mines fully operating

* Twenty-five percent of Queensland mines still offline
* Recovery likely to take longer than for 2008 floods
* Cost to industry seen at A$2.3 billion

Only 15 percent of the 57 coal mines in Australia's Queensland state are fully operational after devastating floods, with damage to the industry estimated at A$2.3 billion, an industry body said on Tuesday.

Australia accounts for about two-thirds of global coking coal trade, with around 90 percent of that coming from Queensland, and the disruptions have pushed global prices sharply higher as buyers scramble for alternative supplies.

About 60 percent of Queensland mines are operating under restrictions and 25 percent are yet to resume operations after waters flooded coal pits, damaged rail lines and closed ports over the past few months, the Queensland Resources Council said.

Rio Tinto , BHP Billiton and Xstrata are among the companies involved in coal mining in Queensland.

While the majority of coal mines in the region are already either fully or partially back to production, it will still take months until operations return to normal, industry experts say.
"Recovery work has started now for most companies, but it will probably be several months before things are at full capacity. Being up and running is one thing, being at full capacity is another," said Andrew Harrington, an analyst at Patersons Securities in Sydney.


Catching up on lost production will likely be more difficult than in 2008, the last year major flooding hit the Queensland coal industry, when companies swiftly made up about half of the production they had lost during the flooding.

"It's going to be a lot more difficult this time. The rail disruptions are much bigger, the duration and extent of this has been much longer and wider, so it's going to be harder for the total production catch-up to get close to what it achieved in 2008," Harrington said.

Rio Tinto said force majeure declarations put in place at four of its Queensland coal mines due to flooding in December are still in place.

While Rio's Australian hard coking coal output was up by a fifth in 2010, it slid from the third to the fourth quarter and is likely to drop further as the full impact of the Queensland floods is felt.

If coal mines take time to resume output following the Australian floods, leaving steelmakers short of the material, iron ore demand , one of Rio's other major products could suffer as well.

But some say lessons learned in 2008 will help mines get back to full production faster.
"Slightly better prepared assets suggest that they might be back on their feet quicker than expected. There is also the push from the government to make sure the industry is up on its feet as quickly as possible," said Mark Pervan, an analyst with ANZ Bank in Sydney. 

Lost production has already pushed spot prices for hard coking coal above $300 per tonne, and prices are likely to remain at that level or continue to climb for a prolonged period due to the flooding, Morgan Stanley analysts said in a note on Tuesday. 

Hard coking prices could reach as high as $500 per tonne, energy consultancy Wood Mackenzie said last week.

Rail firm QR National , the biggest coal freight firm in the state, has been working around the clock to reopen rail lines and said some key lines would be back in service this week.
"However, it is also clear that the restoration of rail services to mines west of Brisbane and in the Surat Basin are going to take much longer," Queensland Resources Council Chief Executive Michael Roche said. 

Roche also said that environmental regulations, which require treatment of water removed from mines, were hampering efforts to return to normal operation and the Council, which represents mining and exploration firms in the state, has requested an exemption, seeking permission to dump water pumped from mines into creeks. 

Queensland's environmental regulatory body said on Tuesday it had granted temporary permission to 20 coal mines to pump out excess floodwater and is considering applications from another 16 mines.

STEEL MILLS HIT
The surge in coking or metallurgical coal prices is likely to hit steel mills, pushing up prices for steel globally and forcing steelmakers to look elsewhere for coking coal supplies. 

JFE Steel Corp , the world fifth-biggest steelmaker, said it is increasing purchases of coking coal from countries other than Australia, like the United States, China, Russia and Indonesia. JFE relies on Australia for about 80 percent of the 17 million tonnes coking coal it uses per year. 

Steel prices are likely to climb to $780 per tonne in 2011, an increase of 11 percent from the previous forecast of $705 per tonne, according to Morgan Stanley estimates, mostly due to higher input costs as the coking coal market grows tighter. 

But it is a difficult time for steelmakers to be lifting prices given thin demand and some steel mills, particularly in top producer and consumer China, are probably not sticking to planned price hikes. 

"If steelmakers tell the market we're raising our prices to cover out cost, that doesn't mean that they get that," said Scott Laprise, steel analyst at CLSA in Beijing. "In this kind of market I would say the pricing power is not good for steelmakers in general."
 
South Korea's POSCO, the world's No.3 steel producer, last week warned it would be difficult to fully pass on rising costs to customers as it tries to secure its coal needs from regions other than Queensland. ($1 = 1.006 Australian dollars). Source: Reuters

Indonesia's motorcycle sales in 2010 rise 26 pct

Indonesia's 2010 domestic motorcycle sales, an indicator of consumer demand, rose 26 percent from a year earlier to 7,369,249 units, industry data showed on Tuesday.

Sales volumes last year were led by Honda , Yamaha , and Suzuki , according to data from Indonesia's Motorcycle Industry (AISI).

The association said total sales volumes for two-wheel vehicles in December 2010 were 513,343 units.

Indonesia's motorcycle sales this year may reach eight million units, the chairman of the association was quoted as saying by local media.

The Indonesian government plans to stop the use of subsidised fuel for private cars in the Jakarta region after the first quarter, but not for motorcycles, which is seen helping support sales growth for two-wheelers. Source: Reuters

Coal Prices Reach Two-Year High as Flooding in Australia Curbs Production

Power station coal prices rose for a seventh week to a more than two-year high and steelmaking coal gained 5.7 percent after heavy rain and flooding curbed output in Australia, the world’s biggest exporter of the fuel. 

The price for thermal coal at the port of Newcastle in New South Wales, the benchmark for Asia, jumped $6.70, or 5.1 percent, to $138.50 a metric ton in the week ended Jan. 14, the highest since September 2008, according to IHS McCloskey, a Petersfield, U.K.-based provider of coal data. 

Queensland’s worst flooding in 50 years may have cost A$2.3 billion ($2.3 billion) in lost coal sales, Queensland Resources Council estimates, with only 15 percent of the state’s mines operating at full production. BHP Billiton Ltd. and Xstrata Plc are among producers who’ve said they may miss deliveries. 

“All the ports are itching to go, none of them have capacity constraints at the moment,” Greg Smith, general manager of operations at the Dalrymple Bay export facility, said by phone. “We’re loading everything we possibly receive. It comes back to the ability of the mines to supplement the stockpiles that we’re drawing down. We’re kind of hand-to-mouth at the moment.” 

Australia is the largest shipper of steelmaking coal and trails only Indonesia in exports of power station coal. The country shipped 259 million tons of the two commodities in 2009, the World Coal Association website shows. The deluge may cut output by about 15 million tons, according to National Australia Bank Ltd. 

Coking Coal Prices
Dalrymple Bay is one of two terminals at Hay Point port, the biggest export harbor for steelmaking coal. The facility is 1,000 kilometers (621 miles) north of the capital, Brisbane. There are 40 ships waiting to load cargoes, with a further eight vessels expected by the end of the month, Smith said.

Australian hard prime coking coal used by steelmakers sold for $280 a metric ton on average last week, up from $265 the week before, according to IHS McCloskey. That’s the highest price for data going back to the week ended Nov. 5. Prices may reach $300 a ton this year, McCloskey said yesterday. 

Some flooded Queensland coal mines may take as many as six weeks to resume production, National Australia Bank analysts led by Michael Bush said yesterday in a report. The stoppages are resulting in about A$600 million of lost revenue a week at current prices, he said. 

Global prices for coking coal may reach between $400 and $500 a ton because of the floods, according to consultant Wood Mackenzie Ltd. The scale of the deluge is worse than the heavy rainfall of 2008, Wood Mackenzie said.

$300 Contracts
Heavy rain and flooding across Queensland in 2008 left steel producers, including Japan’s Nippon Steel Corp. and JFE Holdings Inc., with a threefold increase in annual contract prices to about $300 a ton. 

Australian free-on-board prices may climb to $295 a ton for three-month contracts starting April 1, Ben Westmore, a minerals and energy economist at the National Australia Bank in Melbourne, said Jan. 14. Prices may surge to $292.50 a ton, Melbourne-based Morgan Stanley analysts Peter Richardson and Joel Crane wrote in a Jan. 5 report. 

Steel mills agreed to pay $225 a ton for the three months starting Jan. 1, Bank of America Merrill Lynch analysts said last month. Free on board is a term indicating that delivery at the seller’s expense is included in the invoice price. 

Coking coal suppliers traditionally held annual talks with steelmakers to fix benchmark contracts for the 12 months from April 1, the start of the Japanese financial year. BHP has urged the industry to move to short-term deals to make prices more responsive to market changes. It agreed with JFE Holdings to the first three-month accord in March last year. Source: Bloomberg

Danamon Jumps Most in 20 Months on DBS Speculation

PT Bank Danamon Indonesia rose the most in 20 months in Jakarta trading amid speculation DBS Group Holdings Ltd. will buy a stake in the Indonesian lender, according to Teguh Hartanto, an analyst at PT Bahana Securities. 

Danamon, owned by Singapore’s Temasek Holdings Pte and Deutsche Bank AG, surged 11 percent to 5,950 rupiah at the 4 p.m. Jakarta time close, the steepest increase since May 19, 2009. The Jakarta Composite index gained 0.4 percent. 

“Talks about an investor looking to buy a company prompt the market to assume that the company must be doing well,” Andrew Siahaan, an analyst at PT Reliance Securities in Jakarta, said. Furthermore “a new investor may provide Danamon with fresh funds that it could use to expand lending.” 

So far there’s no plan for a change in the bank’s ownership, Vera Eve Lim, finance director at Jakarta-based Danamon, said in a mobile-phone text message. Temasek said in a statement it declined to comment. 

DBS “aims to have a more diversified geographic reach over time,” Edna Koh, a DBS spokeswoman in Singapore, said in an e- mailed statement. “We will build this out through organic growth, and are not averse to inorganic expansion. However, these opportunities will depend very much on strategic fit, pricing, and market dynamics. Any scenarios linking us to specific names are purely hypothetical, and we are not in discussions on acquisitions at this time.” 

Temasek owns 27 percent of DBS, Southeast Asia’s biggest bank by assets, according to data compiled by Bloomberg. 

Danamon is trading at 12.8 times estimated earnings, below the average multiple of 14 of shares on the Jakarta Composite index. The stock has risen 22 percent over the past year compared with a 34 percent gain on the benchmark stock index. Source: Bloomberg

Indonesian Coal Producers Recommendation Buy, Nomura

Four Indonesian Coal Producers, PT Adaro Energy (ADRO IJ), PT Indo Tambangraya Megah (ITMG IJ), PT Tambang Batubara Bukit Asam (PTBA IJ) and PT Bumi Resources (BUMI IJ) were rated “buy” in new coverage at Nomura Holdings Inc.

Nomura said it was “bullish” on Indonesia’s coal mining industry given the outlook for demand globally and in the domestic power industry.

Rekomendasi HD Capital, 18 Januari 2011

Berikut rekomendasi HD Capital, Senin 18 Januari 2011.
BUY: (UNTR, SMGR, DOID, INDF)
  • IHSG kembali terkonsolidasi dalam trading range, namun masih ada bebrapa saham lapis dua dan blue chip yang menarik untuk dilirik.
  • IHSG close (17-01) 3.535.731(-33.413/-0.94%) (Val.Rp.3.2T)
  • Support: 3.510-3.450, Resistance: 3.590-3.650-3.720
 
Stock picks:
1.    United Tractors (UNTR): (BUY) (Target: Rp 23.600) (close 17/01 Rp 22.200)
  • Segmen bisnis alat berat diperkirakan melebihi ekspektasi pada 2011 (skenario pertumbuhan penjualan berada di atas 26%) sehingga dapat offset penurunan produksi di sektor mining batubara akibat cuaca buruk.
  • Entry: (1) Rp 22.000, Entry (2) Rp 21.500, Cut loss point: Rp 20.900
 
2.   Semen Gresik (SMGR) (BUY): (Target: Rp 9.050) (Close 17/01 Rp 8.800)
  • Pasar ekspektasi harga penjualan rata-rata semen akan dinaikkan pasca laporan keuangan Q4 2010 keluar yang dapat menaikan pertumbuhan penjulan di sektornya 
     
  • Secara valuasi masih termurah di sektornya (2011 PER 11x/PBV 2.9x)
  • Entry (1) Rp 8.700, Entry (2) Rp 8.500, Cut loss point: Rp 8.300
 
3.   Delta Dunia (DOID) (BUY): (Target: Rp 1.470) (Close 17/01 Rp 1.410)
  • Perseroan sedang mengalami pembalikan arah dari sebelumnya kekecewaan laba yang turun pada 2010 ke ekspektasi pertumbuhan kembali di 2011.
     
  • Manajemen mempunyai kapasitas untuk menaikan margin pengerukan batubara sehingga dapat re-financing kembali utangnya dengan bunga yang lebih rendah
     
  • Bila masih terjadi koreksi rekomen akumulasi
  • Entry: (1) Rp 1.370, Entry (2) 1.340, Cut loss point: Rp 1.310
 
4.   Indofood Sukses Makmur (INDF) (BUY) (Target: Rp 5.000) (close 17/01 Rp 4.825)
  • Dominasi pangsa pasar mie instan dan susu di Indonesia, distribusi yang luas serta kebon CPO dan pabrik tepung yang terintegrasi membuat perusahaan ini sangat efisien untuk mengatasi kenaikan harga bahan baku gandum.

  • Persero berencana menaikan harga jual retail mie instan 7-10% tahun ini.
     
  • Valuasi saham ini juga menarik di 2011F PER 13.5x/PBV 2.7x dengan tema diuntungkan dari eksposure ke CPO 
     
  • Entry: (1) Rp 4.800, Entry (2) Rp 4.725, Cut-loss point: Rp 4.625
 
 
Dibuat oleh: 
Yuganur Wijanarko
Senior Research HD Capital. (Yuganur@hdx.co.id)