Attendance at the recent Coaltrans Asia Conference in Bali has upgraded the Indonesian sector rating from “underweight” to “neutral” on the back of likely limited coal-price downside from current levels as global demand (see Exhibit 2) is soon expected to outstrip supplies.
The 2016 coal demand of 862 million metric tons is expected to outstrip supplies amounting to 846 million metric tons, according to a Coaltrans panellist. This condition is expected to persist through 2020, helped by increasing demand from North Asia, excluding China.
On the supply front, 2016 production is expected to fall 3 percent year-on-year (yoy), with China cutting production in an effort to lower its emissions. China’s coal-fired power market is forecast to drop from 71 percent in 2015 to 59 percent in 2020. In April 2016, China’s thermal power-plant output was down by 6 percent yoy...