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Friday, May 19, 2017       10:06 WIB
PremierInsight: Government of China released the guidelines for the coal mine types which become the target for capacity cuts

 

Coal sector: Government of China released the guidelines for the coal mine types which become the target for capacity cuts; 1) zombie projects (mines under long-term loss including illegal mines), 2) mines with high rate of fatality (with high risk for accidents), 3) low capacity mines (of below 300k tons), 4) mines with low operational efficiency. The capacity cut, coupled with capacity expansion from big and efficient mines are expected to result in net capacity cut of ~150mn tons this year. China targets approximately 800mn tons of inefficient coal capacity replacement with 500mn tons of new capacity each year until 2020. (Platts)

Comment: The impact of this policy will not create a sudden jump for coal price like what happen in 2016 when the government limit operational days which result in capacity cut of ~290mn tons. However, we believe the new policy will result in stable coal price between the range of $65-$75 per ton in 2H17. We maintain our coal price estimate of $65/ton in FY17F-18F and reiterate our Buy rating for our top picks, ADRO (TP: Rp2,000) and UNTR (TP: Rp28,500).

 

 

Sumber : IPS RESEARCH


 





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