INDONESIA COAL NOT EXPECTING TO FEEL CHILL

Kalimantan Coal

By Paul Betts and John Aglionby
Published: March 2 2009 23:16 Last updated: March 2 2009 23:16
What global financial crisis? That would be a reasonable conclusion after the latest predictions from the Association of Indonesian Coal Companies.
It estimates that overseas sales from the world’s largest exporter of thermal coal, which is used mostly for power generation, are going to rise this year to 215m tonnes from 200m in 2008. Domestic sales are estimated to jump from 50m to 60m tonnes.
Are these figures credible? Many market indicators suggest not.
The spot price of benchmark Australian power-station coal, for example, fell last week to a 17-and-a half-month low of $67, down 16.8 per cent in a fortnight.
But spot prices can be deceptive and analysts do not expect a collapse in demand for Indonesian coal either.
Indonesia, for example, is in the process of converting many of its power stations to coal from oil. It is also in the process of building 10,000MW of coal-fired generating capacity, although this has hit a funding snag.
And demand in overseas markets, particularly India, appears to be holding up better than other economic data would suggest.
On the supply side, Indonesian costs, at $33-$36 per tonne are below the regional average, and are lower than in Australia, the US and Russia.
So even if demand, and spot prices, continue to head south, Indonesian coal producers are likely to continue to see busy mines this year, even if they are not so profitable as last year.
Still on the right track
Michel Rollier always uses his wife’s maiden name when booking a restaurant. Hardly surprising given he is the senior managing partner of the family-controlled Michelin tyre company that also publishes the famous gastronomic bible that has been handing out and taking away good food stars for more than a century.
“If a restaurant knows I’m coming they will either be falling over themselves to pander to my every whim in the most annoying way or they will organise a lynching party,” he says.
The first edition of the Michelin guide was launched in 1900 to help motorists in France to find a decent hotel and a good restaurant as well as a garage to repair their cars or change a tyre while touring the country.
It proved a brilliant initiative that gave Michelin a head start in the guide book and road map publishing business.
The guide gradually established itself as the leading culinary reference book not only in France but elsewhere in Europe and more recently in North America and Asia.
And, as it gained a reputation for making or breaking restaurants by its awarding stars, it has steadily become a subject of controversy that has helped to increase both its notoriety and its annual sales.
Yesterday, Michelin unveiled the latest edition of its French culinary bible – the 100th since publication of the guide was interrupted during the first and second world wars – attracting all the usual controversy.
This year, Michelin has been accused of being too soft by not taking stars away from established restaurants in the face of the global recession.
But all this sound and fury whether a restaurant deserves a three stars rating or not is not really the point.
For Michelin, the guide books business is not so much a profit centre or a vehicle for diversification but essentially a marketing tool.
Every year, Michelin sells some 1.2m guide books around the world. That is pretty impressive, but it still accounts for only about 0.5 per cent of the company’s annual sales.
And the guides’ purpose is not, primarily, to help increase earnings. The aim is essentially to promote the Michelin brand and the sale of its core product – tyres.
Japan is a good example of this strategy.
The Japanese are mad about food and the Michelin Tokyo restaurant and hotel guide has greatly enhanced the company’s visibility in the Japanese market.
Indeed, Mr Rollier acknowledges that Michelin is probably better known for its guides and restaurant stars in Japan than for its tyre business – and this in the home country of Bridgestone, Michelin’s main competitor in the international tyre market.
Michelin is also continuing to expand its guide book business in countries where it has significant tyre operations.
Hence its decision to launch a Hong Kong and Macau guide last year that is expected to be followed up with a mainland Chinese one.
It is also considering a guide for Brazil where it has important operations.
The guide books are also being updated and adapted to new formats such as mobile telephones, GPS systems in cars and so on.
Yet the fundamental point of this publishing business has not changed since it was first started in 1900 – to promote the products of what has become the world’s leading tyre maker.
As for all the debate about who gets a star and who doesn’t, the company is quite sanguine. The culinary stars belong to Michelin and Michelin does what it wants with them.
world.view@ft.com

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