Indonesia tax concern hits Banpu share price
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Banpu's share price has come under pressure, falling back to its 2009 level as investors grow concerned over the impact of Indonesia's coal-export tax on the firm's operations in that country.
Closing at Bt432, the share price was the lowest since November 2009. It lost Bt18 or 4 per cent yesterday, while the Stock Exchange of Thailand’s composite index lost 1.44 per cent to end the day at a four-month low of 1,099.15 points.
The market was also under selling pressure on heightened political conflicts and the likelihood of Greece’s exit from the euro zone. Foreign investors were net-sellers yesterday, with a net-sell position of Bt1.3 billion.
Through a 65-per-cent holding in Indo Tambangraya Megah (ITMG), Banpu produced 25 million tonnes of coal in Indonesia last year and the output is expected to rise to 27 million tonnes this year. It is now Indonesia’s third-largest coal producer.
The stock came under pressure despite a company executive last week saying the mine’s exports would not be subject to the tax, as it produces a high-energy form of coal.
Indonesian Energy and Minerals Minister Jero Wacik said on Monday that the country needed to conserve coal for domestic use but gave no details on the scope or time frame of any curbs.
According to Wood Mackenzie, a global energy-research consulting firm, the policy would make the exports of low-energy and high-moisture coal unprofitable. At Coaltrans Asia 2012, Rohan Kendall, a coal research analyst, yesterday noted that Indonesia’s export tax would put at risk up to 68 million tonnes per annum (mtpa) of coal exports and US$11 billion (Bt348 billion) of the industry’s value.
While Indonesia will likely remain the largest seaborne thermal-coal exporter up to 2020, the introduction of the export tax could cause it to lose competitiveness compared with other major supply regions, Wood Mackenzie said.
“Indonesian cash costs have doubled since 2006,” Kendall of Wood Mackenzie said. “This was not an issue while coal prices were rising but now that prices have softened it is important to constrain costs to keep projects viable. “Even without the imposition of an export tax, Indonesian coal producers may find it difficult to prevent a continuation of cost-increase imposition, but additional taxes will further exacerbate cost hikes.”
Noting that the tax will erode the competitiveness of mines, Kendall said: “An Indonesian export tax would have a larger effect than the combined impact of Australia’s minerals resource rent tax and carbon tax, which we estimate will decrease the value of the Australian coal industry by $9 billion.”
Wood Mackenzie noted that even without the export tax, Indonesia would experience increasing costs because much of its future coal production will be from greenfield areas in South Sumatra and the Wahau coal field in East Kalimantan.
“China and India will continue to ensure strong growth in coal demand,” Kendall noted. “But for Indonesia to maintain its position as the world’s largest coal exporter it will need to ensure cost increases are manageable. An export tax on top of already increasing costs will jeopardise the viability of a significant volume low-rank-coal exports.”
