Category: Commodities

Growing LPG Pain & Coal-to-DME

Indonesia’s decision to phasing out kerosene use and replace it with liquefied petroleum gas (LPG) last decade succeeded in cutting down State subsidies for kerosene which reached Rp48.2 trillion (US$5 billion that time) to nearly zero last year. Subsidy for LPG, however, increased dramatically from Rp5.6 trillion in 2008 to around Rp38 trillion set aside in the State Budget 2021. 

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Expecting commodity windfall (2)

Crude palm oil (CPO) was settled at US$1,090 per ton (CIF) in Rotterdam last Wednesday, the highest level seen since May 2012. At this price, the government might collect more than US$250 per ton of CPO exported in the form of export duty and export levy. The country is predicted to export up to 37 million tons of CPO and derivatives (including oleochemicals and biodiesel) this year. 

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Expecting commodity windfall (2)

Crude palm oil (CPO) surged to US$1,050 per ton (CIF) in Rotterdam on Monday (Jan 4), a level not seen since July 2012, due to a decline in supply amid strong La Nina weather pattern and reports about shortage of migrant workers (mainly Indonesians) on Malaysia’s plantations. Robust demand from China and lower import duty in India also contributed to the rally in CPO price.

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Expecting commodity windfall

The government has set thermal coal reference price (HBA) for January 2021 at US$75.84 per ton, an increase of 27.14% from December 2020 to reflect recovery of the key export commodity in international market. The government clearly expects windfall from the commodity to help this year’s State Budget because average reference price in 2020 was only US$58.17 per ton.

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2021 Outlook: Gold and Copper

Papua province’s economy, which has been under pressure in the past few years due to downfall of copper and gold production at PT Freeport Indonesia, should recover significantly next year. The economy of West Nusa Tenggara province should also be supported by full commercial operation of Phase VII at Batu Hijau copper and gold mine of PT Amman Mineral Nusa Tenggara (AMNT) in Sumbawa Island.

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Coal & Domestic Smelters

Weaker global demand due to the Covid-19 pandemic pressured thermal coal to as low as US$51 per ton this year. Gradual recovery of some major economies, boosted by developments surrounding the vaccines, has recently lifted thermal coal back to US$84 per ton. But, while export market has been under pressure in the first nine months of 2020, some coal miners reported stronger domestic sales.

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The Nickel Country (15): EV Disruption

Germany, the largest auto market in Europe, recorded a stunning 20.5% market share for electric vehicles (EVs) last month, of which pure battery EV got 10%. Europe’s largest economy reported steady growth of EV market share from 13.2% in August, 15.6% in September, and 17.5% in October 2020.

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The nickel country (11): EV Disruption

Last week, South Korean player Hyundai published a two pages advertisements at Kompas, the largest newspaper in the country, offering its battery electric vehicles Ioniq and Kona for Indonesian market. This week, national media reported about Hyundai’s plan to build EV manufacturing facility in Delta Mas City, which is controlled by Sinarmas Group. 

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The nickel country (10): Financials

Nickel producer PT Vale Indonesia Tbk (INCO) booked net profit of US$76.6 million in the first nine months of 2020 against US$0.16 million in the corresponding period last year, thanks to higher margins from bigger sales volume and higher average selling price of nickel, while input costs were lower. 

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Bright spots in 9M 2020: Agriculture

Astra Agro Lestari (AALI) booked net profit of Rp583 billion in the first nine months of 2020, skyrocketed by 424% from the corresponding period last year, thanks to substantial improvement in the third quarter. Kirana Megatara (KMTR) also reported significantly stronger performance in the third quarter, thanks to higher average price of natural rubber.

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The nickel country (9): Blackrock

Indonesia’s nickel processing industry has continued to attract global investment names. Blackrock, one of the world’s largest investment management firms, has in recent years invested indirectly in the development of some nickel processing facilities in Indonesia, including nickel sulphate for electric vehicle battery.

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