Reflections on the Coal Market in 2010 - (Part 1 of a 2 part series: SCoTA's INDO contract and doing business in Indonesia)

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As the global economy recovers, demand for most raw materials has risen dramatically and so too have commodity prices. Coal provides one of the most graphic examples. Not only are prices continuing to rise sharply, but the financial press is full of reports of acquisitions in the sector as companies seek out coal assets around the world.

Indonesia's coal mining sector has certainly become the focus of renewed investment interest. The combination of comparatively low-priced coal reserves/low operating costs and Indonesia's geographic position (giving it a competitive edge so far as freight is concerned), means that Indonesian coal sector is very well placed to take advantage of strong demand in India and China.

No surprise therefore that Indonesia's vast coal reserves provide attractive opportunities to investors and coal buyers alike. In particular, the wide variety of quality within Indonesian coal allows for blending to meet specific buyer requirements, whilst the lack of a generally applicable minimum purchase quantity (such as that associated with Australian coal) appeals to a wider variety of buyer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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