Semirara taps Japan coal market as alternative to China

MANILA  -Integrated energy company Semirara Mining and Power Corp. (SMPC) is positioning to be a key exporter of coal to Japan in a bid to unlock better pricing and diversify its overseas business that is currently skewed toward China.

The Consunji family-led company is set to make its second “trial” shipment of coal to Japan this June, with 50,000 metric tons (MT) of Semirara coal going to Shikoku Electric Power Corp. for a 700-megawatt (MW) coal-fired power station.

“China is still our main foreign buyer but with their industrial output growing slower than expected, we want to develop other Asian markets like Japan,” SMPC president and chief operating officer Maria Cristina Gotianun said in a disclosure to the Philippine Stock Exchange on Thursday.

“For 2023, we are targeting to export around 30 percent of our full-year sales target of 15 to 16 million MT,” added Gotianun.

Lower volumes

From January to March, SMPC’s coal shipment to China slid from 2.2 million MT to 1.1 million MT, accounting for 72 percent of its exports.

South Korea is a steady market for SMPC, buying 300,000 MT or one-fifth of the company’s export sales. On the other hand, Japan accounts for only 5 percent of SMPC’s coal export for now.

SMPC first made a trial shipment to Japan in January 2023, selling 78,410 MT of midgrade coal to J-Power, a utility company that operates coal, hydroelectric, wind and geothermal power stations.

Buyers from Japan, the second largest consumer of coal in the region, typically pay more and are deemed to be a more reliable market than those from China, industry sources said.

Also, China sometimes curbs coal imports to encourage domestic sourcing. However, Japanese buyers need a “trial” period, after which they will analyze coal suitability before making a commitment to buy more.

Despite the global decarbonization efforts, there are new coal-fired plants still being built in Japan to replace decommissioned nuclear power plants for now.

SMPC is keen on tapping new export markets like South Korea and Japan because of large demand from these markets. As a manufacturing powerhouse, Japan’s annual demand for coal is estimated at around 110 million MT while demand in Korea is estimated at around 70 million MT a year.

Geographic advantage

Meanwhile, the Philippines’ geographic location makes it the closest lower-grade coal supplier to South Korea and Japan outside of China and Russia.

Coal demand in the Philippines is about 35 million MT, or nearly twice the 16 million MT coal production that SMPC can sell externally. However, many of the country’s coal-fired plants are old and unable to process low-grade coal produced by SMPC.

To date, SMPC is still the only power producer in the country that owns and mines its own fuel source. It is also the country’s largest coal producer, accounting for 99 percent of local production.

In the first quarter, SMPC’s coal revenues tumbled by 40 percent to P15.5 billion mainly due to high base effect of record production, shipments and selling prices.

Standalone net income slumped by 51 percent from P14.2 billion on top line weakness and slower decline in cash costs.

In 2022, total coal volume sold by SMPC reached 14.8 million MT, 3 percent down from last year. About 48 percent of sales went to the export market.

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https://business.inquirer.net/376565/semirara-allocates-p5-6-b-capex-for-2023