* What: Coaltrans Asia; Bali, Indonesia
* When: May 29 - June 1
* Focus on China, India demand, Japan recovery post-tsunami
* Indonesia coal mining regulations a continuing issue
By Rebekah Kebede and Michael Taylor
PERTH/JAKARTA, May 27 As China tries to cope
with what may be its worst power shortage in years, coal demand
from the world's biggest consumer is likely to take centre stage
at one of Asia's largest coal industry gatherings in Indonesia
China will face stiff competition for coal shipped by
Indonesia, the world's biggest exporter of thermal coal, from
India where demand for electricity is rising in an economy seen
growing around 8.5 percent.
"With domestic prices rising so strongly -- they are
basically on par with import prices now -- the likelihood of
China being strong importers of thermal coal over the summer is
extremely high," said Daniel Hynes, director of commodity
research at Citigroup in Sydney.
Chinese domestic coal prices rose to the highest level in
more than two years last week as utilities stocked up ahead of
the summer months, making imports more attractive.
Chinese buyers have already been on the hunt for Indonesian
cargoes as well as some Australian coal over the last few weeks
to fill requirements. [ID:nLDE74J1ND]
If Beijing lifts restrictions on how much coal-fired power
plants are permitted to charge more for electricity, as it has
already done in some provinces, import demand could grow even
higher as utilities burn more coal.[ID:nL4E7GI02Q]
Indian demand for Indonesian coal is also on the rise, and
India's short-term and long-term demand is likely to be a focus.
"Over the last couple of months, you're actually seeing the
share of India coal imports from Indonesia, increasing... India
has made a lot of progress with imports, with year-on-year
growth. People will want to see where they are at the moment,"
said one Indonesia-based analyst who asked not to be named.
Growing demand for Indonesian coal by India, to fill the
widening gap between domestic coal output and demand, is likely
to continue, the analyst added, resulting in intense competition
between India and China for tonnage.
Indian and Chinese companies are also seeking to acquire
stakes in Indonesian coal mines to secure their supply, with
Coal India , the world's largest coal miner, in
advanced talks to buy up to 40 percent of Indonesian low-grade
coal producer Golden Energy Mines for up to $1 billion, three
sources with direct knowledge of the deal said.[ID:nLDE74P1TQ]
Although India is home to 10 percent of global coal
reserves, it is plagued by a shortfall in local supplies as
demand has grown rapidly with the increase in coal-fired power
India's coal demand is forecast to grow 11 percent a year,
reaching 135 million tonnes in 2011/12 with imports set to make
up about 20 percent of its total consumption. [ID:nSGE7280CO]
ANTICIPATION OF RECOVERY
The industry will also be closely watching Japanese demand
for coal, which withered after the March tsunami took some
coal-fired plants offline and forced some utilities to declare
force majeure on coal shipments. Some Japan-bound cargoes
have been diverted to destinations such as China.
Japanese buyers, particularly industrial buyers, have been
indicating a return to the market for coal, market sources said.
"Japanese buyers are starting to think that they might have
a slight increase in coal burn," one Australia-based market
But industry watchers said demand so far has been tepid and
utilities are still recovering from the tsunami
"They are certainly starting to dip their toes back in the
water... (but) it's going to be July before the utilities in
particular are back on their feet and a bit more comfortable
with making some more longer term purchases," Citigroup's Hynes
said, adding that a full-blown recovery may not materialise
until the late third quarter or even fourth quarter of the year.
INDONESIA MINING REGULATION
With demand for Indonesian coal ramping up, in particular
from China and India, Indonesian coal production capacity and
regulations will also be in the spotlight.
Indonesia's coal, generally lower-quality than the coal its
neighbour Australia produces, is attractive to Asian buyers
seeking bargains, and cheaper freight from Indonesia offers an
But the lack of infrastructure and some government
regulations have depressed production.
"The overall consensus is that production is still under
pressure," Singapore-based UBS analyst Andreas Bokkenheuser
Indonesia also struggles to deal with a raft of problems
including illegal mining and overlapping mining concessions.
In its latest move to clean up the industry, Indonesia's
government will audit some 8,000 new mining permits to make sure
they are in line with mining and environmental laws.
"For the fifth or sixth year in a row, it's going to be
about production, infrastructure and regulations," Bokkenheuser
"There will be talk about new land reform, increasing the
investment environment in Indonesia -- that will be the primary
(Editing by Ramthan Hussain)