Indonesian miners like Harum Energy (HRUM), Permata Energy Resources (TKGA), and Adimitra Baratama Nusantara (subsidiary of Toba Bara Sejahtera/TOBA), and Orpheus Energy Ltd shared a view that China will not impose a ban on imports of lower quality coal from Indonesia because it would increase China's overall costs. The problem, even without that policy, China's demand has slowed down substantially.

Ten years ago, Indonesian coal industry was over 90% dominated by producers under the Coal Contract of Works (CCOWs). Now, total output of coal producers under Mining Business Permit (IUP, earlier called KP) might be around 40% of the country's output. While concessions under IUP might be generally classified 'lower quality' than PKP2B in various aspects, they're benefited from low royalty rate (3-7%) than PKP2B (13.5%). 

Coal is the largest export commodity for Indonesia. Thousands of companies and millions of families are involved directly or indirectly in the sector. Over US$20 billion loan facilities have been directed to the industry. Unfortunately that the industry has yet to see the light. The benchmark price of Indonesian coal for June 2013 declined further to US$84.87 per ton. Also in this report: (1) Atlas Resources Losses and (2) ABM Investama-Admire Corp deal.

The end of quantitative easing might prolong recovery of commodities worldwide. That's probably why Nymex crude oil retreated to below US$95 per barrel yesterday, dragging down energy shares worldwide. Peabody Energy, the world's largest thermal coal producer in private sector, ended substantially lower by 4.34% in New York Tuesday.

Nymex crude oil has returned to above US$96 per barrel, but pressures continued on shares of coal producers listed on Indonesia Stock Exchange (IDX), mostly due to concern about Chinese economic growth. Concern over underreported output of Indonesian coal producers is also still out there, especially from junior and small players entering the market in recent years.

Financial Times reported Thursday that Bumi Resources has launched legal action against Thiess Contractors Indonesia, subsidiary of Leighton Holdings, in the Queensland Supreme Court, Australia to question whether its contract with Thiess was valid under the 2009 Indonesian mining law. Leighton shares dropped 3.6% on ASX this morning.

Newcastle Port, Australia---the largest thermal coal exporting terminal in the region---shipped out 2.56 million tons of coal in the week ended June 3rd, slightly higher than the previous week. Shares of some coal producers listed on Indonesia Stock Exchange (IDX), meanwhile, are now valued below their equities. In this report: Borneo Lumbung, Bayan Resources, Berau Coal Energy, and Realm Resources.