The conversion rate of 1.5:1 is based on trials prior to the modification work, so this is not a final figure. Further you forget the transport costs for the buyer being ~43% higher since one ton of Tabang briquettes carries ~43% more calorific value than a ton of Tabang subbit. coal. Thus any buyer should always prefer briquettes. Also bear in mind that power plants' efficiency (especially those (ultra-)supercritical ones) highly depends on burn temperature which again depends on calorific value. That's why when using low rank coal you always need to additionally buy high rank coal in order to blend them, which again means handling costs for the buyer. But of course Bayan's margin surplus from BCB has shrunken significantly over the past quarters since the price for subbit. coal has been driven by the tremendous demand from India. However this is a problem specific for Indonesia and even there the low spread between high and low rank coals won't last forever. In the US, e.g., subbit. coal with 4500 kcals/kg costs some $9/t ex-mine while bit. coal is traded >$80/t. Even if you consider the high transport costs of getting coal from the Powder River Bassin to West Coast ports there's still a high arbitrage for WEC to tap. Surely the virtual end of Tabang has set WEC back by a year or so but the BCB business is far from dead.
WEC Price at posting:
72.5¢ Sentiment: Buy Disclosure: Held
