PT Makmur Sejahtera Wisesa has installed a total of 597 kWp rooftop and floating solar PVs, generating up to 749,294 kWh per year to support Adaro Group's mining operation.
PT Adaro Energy Indonesia Tbk
For the Three Months Ending Jun 30, 2022
For further information please contact
Head of Investor Relations Email: bret.ginesky@adaro.com Mobile: +62 81 19779771
Head of Corporate Communications Email: febriati.nadira@adaro.com
0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Historical Quarterly Overburden Removal Volume and Strip Ratio
REVIEW OF THERMAL COAL MARKET
Geopolitical tensions and unfavourable weather caused a rally in the prices of bituminous and sub-bituminous coal in 2Q22. The price of 6000 NAR products benefitted from a coal and gas supply crunch. In April, the European Union (EU) announced its plan to ban all Russian coal imports from 10 August, Japan also pledged to follow suit in phases. Ahead of the official embargo period, many European buyers bought more of alternative cargoes to distance themselves from Russian coal. This decision led to Australian shipments to Europe in 2Q22 increasing by more than fourfold 1Q22 volumes whereas Colombian shipments to Europe in 2Q22 were more than double 1Q22 volumes. As a result, Europe's ARA coal stockpile almost reached its full capacity, ballooning to around 7-8 Mt in late June 2022 from 3 Mt in early April. Simultaneously, buyers from the Japan, Korea and Taiwan region were competing to secure Newcastle coal cargoes to meet summer demand, contributing to a 4% increase in Australian thermal coal intake over 1Q22. While demand was strong, Australian supply remained tight throughout the quarter, resulting from wet weather conditions at mining regions and loading ports. Strong demand from Europe supported the landed coal prices in ARA which increased by 45% compared to the previous quarter, averaging approximately US$330/t. Similarly, the Newcastle coal price increased by ~40%, averaging US$370/t.
A surge of COVID-19 infections in China led to slower demand from the power sector, as social restriction efforts impacted coastal industrial hubs. In June, heavy rain and floods hit the coastal regions, famous for strong thermal power generation, and supporting a significant increase in hydro generation. Overall, the quarter saw a 195 TWh decline in thermal power generation, partially offset by a 169 TWh rise in renewable power generation, led mostly by hydropower (+64% q-o-q). Despite the drop in thermal power generation, China's imports of Indonesian coal increased q-o-q. In contrast, Indian power generation in 2Q22 rose by 41 TWh q-o-q, led by coal (+27 TWh q-o-q). After experiencing the hottest March in 122 years, India's elevated temperatures continued through April and May. The record surge in electricity demand led to an energy supply shortage, leading states to impose intermittent blackouts. As a result, the Indian government increased import volumes. In May 2022, India imported 20 Mt of thermal coal, the highest monthly volume in more than 2 decades, 80% of which was Indonesian coal. Demand from Japan, South Korea and Taiwan also increased in the first half of the year compared to the same period last year, supported by needs to secure fuel while gradually reducing intake of Russian coal. Buyers in Japan, South Korea and Taiwan were also preparing for the summer season towards the end of the quarter. Stronger imports from China, India and the Northeast Asia market helped the recovery of Indonesian supply, with average monthly shipments of 38 Mt - 40 Mt, 35% higher than 1Q22. In 2Q22, Indonesian 5000 GAR and 4200 GAR prices averaged above US$140/t (+16% q-o-q) and US$89/t (+8% q-o-q), respectively.
REVIEW OF METALLURGICAL COAL MARKET
Despite economic headwinds and falling steel prices in 2Q22, seaborne metallurgical coal prices averaged higher than the previous quarter as supply remained tight during the initial months of the quarter and only started to ease late in the quarter. China registered a 34 Mt increase q-o-q in crude steel production during 2Q22 following the relaxation of steel production curbs due to
winter and winter Olympics. Although increasing q-o-q, China's crude steel production volume in 2Q22 was lower by 11 Mt compared to 2Q21, according to the World Steel Association. The Hard Coking Coal price of Premium Low Volatile basis CFR China (HCC PLV CFR China) was strong in April, averaging around US$460/t. The blast furnace utilization rate improved steadily as Tangshan gradually exited its lockdown, while coke inventories at mills were impacted by tight supply of metcoal due to transport controls. As coke inventories declined, coke prices increased and mills began to restock coke and metcoal, prompting higher HCC PLV CFR China prices. However, prices declined thereafter, with a build-up of finished steel inventories due to weak downstream demand. The subdued downstream demand was pronounced in China's real estate sector which contributed a decline of 7% y-o-y to the country's GDP in 2Q22. In addition, stronger supply from Mongolia reduced China's appetite for seaborne imports. Mongolian metallurgical coal supply to China in 2Q22 was more than double last year's volume.
In ex-China countries, downstream demand was weak in both the construction and automotive sectors. The Eurozone construction PMI in 2Q22 steadily declined underscoring a contraction in house building, and commercial and civil engineering activities. In addition, auto sales in the EU, Japan, and South Korea all registered double-digit declines y-o-y in 1H22. Crude steel output was weaker in 2Q22, with ex-China countries producing 10 Mt less than last year. However, the FOB prices of Australian metallurgical coal remained high due to limited availability as 2Q22 supply remained tight leading to Australia's export numbers in April and May reporting weaker monthly performances y-o-y. The Hard Coking Coal Price of Premium Low Volatile FOB Australia (HCC PLV FOB Australia) prices only started to fall in late May, influenced by Anglo American's restart of its Moranbah North production, improving weather conditions and weakening demand.
HCC PLV prices for basis FOB Australia and CFR China had averaged around US$460/t each, in the second quarter. Macro weaknesses in the ex-China market caused the Australian index to decline by around US$25/t whereas relaxation of steel production in Tangshan during April helped to support the PLV CFR China index to average more than US$55/t higher q-o-q.
REVIEW OF PT ADARO ENERGY INDONESIA TBK (ADRO) OPERATIONS
ADRO produced 28.01 million tonnes (Mt) of coal in 1H22, representing a 6% increase from 26.49 Mt in 1H21. Currently, Adaro is maintaining the FY22 production target of 58 - 60 Mt in anticipation that the coal getting operations will improve in 2H22 given forecasts of better weather conditions and increased heavy equipment availability. Mitigating the challenges in obtaining heavy equipment, the Company's subsidiary PT Saptaindra Sejati (SIS) appointed a new contractor for PT Adaro Indonesia which has the equipment capacity to support reaching the production target.
In 1H22, coal sales volumes increased by 7% to 27.50 Mt from 25.78 Mt y-o-y as the medium CV product continues to attract high demand from customers. ADRO reported a decrease of 11% to
102.05 million bank cubic meter (Mbcm) of overburden removed in 1H22, from 115.22 Mbcm in 1H21. This decrease was driven by the 17% decrease in overburden removal at the Adaro Indonesia mine from the year ago period. The lower overburden removal led to ADRO's strip ratio in 1H22 declining to 3.64x from 4.35x in 1H21.
In 2Q22, coal production increased by 16% to 15.9 Mt from 13.64 Mt in 2Q21. The strong production growth helped contribute to coal sales volume reaching 15.3 Mt, or 16% higher y-o-y from 13.2 Mt. In the quarter, the medium CV product accounted for 77.7% of sales compared to 71.6% in 2Q21. Total OB removal volume in 2Q22 decreased by 14% to 53.83 Mbcm from 62.68 Mbcm in 2Q21, resulting in a strip ratio of 3.4x. Management anticipates that Adaro can meet the coal production target for 2022, however, due to poor weather and industry-wide challenges in obtaining heavy equipment, the FY22 strip ratio may come in below guidance.
The medium CV product composed 77.0% of Adaro's coal sales in 1H22, compared to only 73.0% in 1H21. Indonesia is the primary sales destination, on a trailing 12 months (ttm) basis and 1H22, Indonesia accounted for 25% and 23% of AEI's coal sales, respectively. Although from quarter to quarter coal sales to the domestic market can fluctuate, given the Company's annual volume based contracts it remains on target to contribute 25-27% of sales to the domestic market in Indonesia. Sales to India increased to 15%, in-line with the higher demand for thermal and metallurgical coal product from the country.
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PT Adaro Energy Tbk published this content on 01 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2022 15:44:03 UTC.