Impact of Japan earthquake on Indonesia coal sector - Nomura Indonesia

There has been a consensus call that the earthquake will push up the coal price as Japan can be forced to buy more coal especially if the country's nuclear power plants are affected. There is a possibility as well that the negotiation between Japan and Australia on the new coal price that is expected to happen this/next week will be delayed.

There's been no delay/cancellation on coal shipments from Indonesia to Japan so far. The Indonesian coal companies expect the demand from Japan could increase due to this earthquake. As Indonesia coal companies just priced 30-40% of the 2011F contracts, they all will benefit from higher coal price. But those that will benefit the most are those that have high exposure to spot seaborne market. The pecking order will be:

- HRUM IJ (90-95% export with 60-65% exposure to spot market) - price target Rp11,400
- ITMG IJ (90-95% export with 35-40% exposure to spot market) - price target Rp69,000
- BUMI IJ (90-95% export with 30% exposure to spot market) - price target Rp4,300
- ADRO IJ (70% export with 30% expsoure to spot market) - price target Rp3,700
- PTBA IJ (30% export) - price target Rp30,000

We haven't changed our earnings estimates and price targets.