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Kamis, 30 Juni 2011

The bull market for thermal coal - CLSA

The bull market for thermal coal I would say officially kicked off in 2006 when China became a net importer of coal that year. Newcastle coal prices took off from around $50 (hovering at those levels since 2004) to almost $200 in 2008.

The biggest challenge for India will be rising coal shortages

While China electricity consumption growth is set to decline over the next few years (note still accounts for the worlds biggest incremental demand), our latest 300 page "Powering Chindia" report (ask me if you want a copy) tell us today India will set the next stage of growth. They are where China was in 2002.

Per-capita power consumption in top provinces in India is at similar levels to bottom provinces in China

New power capacity addition is increasing rapidly and with this, power consumption is set to accelerate and growth over next few years will surpass that in slowing China. While share of coal-fired generation will decline in China, it is going to rise rapidly in India just given the sheer amount coal-fired capacity under construction currently.

Coal fired plants are driving most of India's capacity

One of the key constraints on India's power demand growth has been slow groth in power capacity. However, this is about to change. We expect conventional power capacity addition to go from 47GW in the 11th plan to 87GW in the 12th plan. Power -capacity adition rate to increase from 7.1% over the last five years to 9.3% over the next five. The rate of growth of thermal power capacity will be even higher.

All of this new capacity may not get enough coal. In fact, our calculations show that even projects based on domestic coal will have to import 30% of their coal requirements.

I would be buyer of Bumi, Indika and Harum.

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