W

ith commodity prices and sales volumes showing signs of recovery, analysts predict that the value of mining company stock will keep going up until year-end.

Stocks in mining companies under the Jakarta Composite Index (JCI) — the main benchmark for the Indonesian Stock Exchange (IDX) — have risen 38.31 percent so far this year to 1,121.81 on Tuesday. The growth rate is higher than the overall JCI gain of 11.03 percent year-to-date (ytd) to 5,099.533.

Last year, stocks in mining firms hit a nine-year low of 811.072 on Dec. 30, dropping by 40.75 percent over the year as the Indonesian crude oil price (ICP) hit US$35.47 per barrel, its lowest level since 2004.

January saw an even lower ICP at $27.49 before it crept up to around $44.5 in June as global oversupply slowly diminished, according to data from the Energy and Mineral Resources Ministry.

For the last two years, global oil prices have been in free fall, from around $110 per barrel of Brent crude in June 2014 to around $40 recently, resulting in mass layoffs and halted expansion in many countries, including Indonesia.

Coal prices, meanwhile, have also joined the ride with the latest coal benchmark price (HBA) standing at $51.81 per ton, a 1.2 percent increase compared to May, but still lower than January’s price of $53.2, ministry data shows.

Analysts predict the prices will keep going up, resulting in a higher index by December.

Koneksi Kapital analyst Alfred Nainggolan expects the index to hike up to 60 percent by year-end, from 811.072 on Dec. 30, with an oil price standing at $50 to 60 per barrel and coal at $50 to 55 per ton.

Danareksa Sekuritas analyst Lucky Bayu Purnomo predicts it will gain by 21 percent by year-end from 1,090.38 recorded on Monday with an oil price of $52 per barrel and coal to strengthen mildly to around $59 per ton.

“Stocks in mining recover fast as they fell sharply last year, so this is the following rebound, besides the fact that the global economy has started to recover, increasing global demand for oil,” Alfred told The Jakarta Post.

Koneksi Kapital cited two oil and gas companies, Medco Energi Internasional (MEDC) and Elnusa (ELSA) and state diversified miner Aneka Tambang (ANTM) as firms to watch out for as commodity prices recovers.

“Medco will also benefit from its recent acquisition of Newmont’s stake, diversifying its business with copper and gold business,” Alfred added.

Last month, Medco announced that it had formally agreed to take over a controlling stake in the local arm of global mining giant Newmont Mining Corp., in a deal worth US$2.6 billion. It confirmed that it would acquire PT Amman Mineral Internasional (AMI), which owns an 82.2 percent stake in Newmont Nusa Tenggara (NNT), operator of the country’s second-largest copper and gold mine.

Danareksa, meanwhile, points to fuel distributor AKR Corporindo (AKRA) and state gas firm Perusahaan Gas Negara (PGAS) as firms that will benefit from the commodity price recovery.

For coal, meanwhile, firms that supply the local market will likely benefit more as the government has been focusing on improving power infrastructure by operating and building more coal-based power plants (PLTU).

Indonesia has set a target of an additional 35,000 megawatts (MW) of power plants, almost 60 percent of which will be powered by coal.

Both Koneksi Kapital and Danareksa expect stocks of Tambang Batubara Bukit Asam (PTBA) and Adaro Energy (ADRO) — both coal suppliers to the domestic market — to enjoy the largest gains this year.