China’s recent announcement to cut outdated industrial capacity has sent a wave through global commodity markets—boosting the share prices of U.S. steelmakers and coal producers. The move, seen as part of Beijing’s broader push to restructure its heavy industries and reduce pollution, involves cracking down on low-priced domestic production and phasing out inefficient steel and coal operations.
This development was welcomed by global markets, particularly in the U.S., where producers have long faced intense competition from cheap Chinese exports. Investors responded swiftly: shares of steelmakers like Cleveland-Cliffs rose by 4.3%, while Nucor and Steel Dynamics also saw modest gains. On the coal side, companies such as Warrior Met Coal surged 9.7%, Ramaco Resources jumped 14%, and Peabody Energy advanced 6.7%—a strong indication that markets expect a tightening in global supply, especially in premium coking coal used for steelmaking.
LME Nickel and Newcastle Coal Price
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We see that this production cut as a momentum that must be seized amidst current global market uncertainties. Investors might be getting more desperate each day of any kind of positive catalyst, especially for Indonesian equity market.
We believe that coal as a source of energy, is likely to be more stable on its demand continuation as energy is not only needed for industrial activity, yet it is also needed for housing power generation which likely to make coal price more stable.
A coal company that we see currently lagging behind the recent coal price appreciation is AADI.
AADI Share Price Performance (White) vs. ICE Newcastle coal Price (blue)
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As seen in the chart above, AADI’s share price typically trades above Newcastle coal prices. However, the recent appreciation in coal prices has not yet been fully reflected in AADI’s share price. Moreover, we believe this is just the beginning of the coal price rally—although the pace of the rally may not be so aggressive.
Currently AADI is trading at a very undemanding valuation, trading only at 2.4x TTM PE while being one of the best and most efficient coal companies in Indonesia.
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Considering all of the above, we reiterate our BUY call on AADI with TP of 30,100, supported by the robust cash flows, efficient operations, and strong market position.
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