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Wednesday, 18 September 13
IRON ORE AND ZINC ARE BEST PERFORMING MINING SECTORS IN CURRENT LOW PRICE, HIGH COST ENVIRONMENT - WOOD MACKENZIE
 With the fall in commodity prices, cash margins in the mining industry have come under pressure. Accordingly, producers and investors are placing intense focus on both operating and capital costs. Wood Mackenzie's report titled 'Who hurts most' analyses cash costs and margins across the bulk commodities as well as base and precious metals. The report reveals that the iron ore and zinc sectors will perform best on average; while copper, export metallurgical coal and gold will be most challenged. Based on this, companies may have to make important decisions to protect their overall margins.
Wood Mackenzie finds that amongst the bulk commodities, iron ore stands above the rest. Despite pulling back from 2012 levels with a 19% cash margin decline, iron ore still has a very strong average industry margin of US$49/tonne (52% of average price) in 2014, enabling continued large cash generation in this high volume business. This supports the on-going focus by the major producers like Rio Tinto, BHP Billiton and Vale, on pushing ahead with expansions at their low cost iron ore operations. It is also in stark contrast to coal and bauxite, both of which have average margins of less than 25% in 2013 - the outlook is particularly bleak for export thermal coal with an average margin of only 19% in 2014.
Mr Steve Hulton, Principal Mining Analyst for Wood Mackenzie, says, "The sectors that fare the worst, with biggest average falls in margins from 2012 to 2014 are copper, export metallurgical coal and gold. Nickel has the lowest average industry margin of only 13% of price in 2013. This rises slightly in 2014, but it is still the worst of all commodities studied. As such, the nickel industry is under severe pressure. In 2012, one-third of industry production generated negative margins after taking into account total cash and sustaining capex costs."
The zinc mining sector has a very high average margin as a percentage of the metal price due to the large contribution of by-product credits like copper, lead, silver and gold, which offset operating costs. While remaining relatively high, the average zinc margin is expected to decrease to 83% in 2014, even with a rising zinc price, due to the lower value of by-product revenue in this polymetallic sector.
For the copper and gold industries, lower prices will continue to put pressure on overall operational cash-flow. In Wood Mackenzie's analysis, average industry margins in 2014 fall to 39% for copper and 44% for gold, down from 49% and 50% respectively from 2012. In export met coal, margins in 2014 are only 25% of average price, down from 30% in 2012.
Mr Hulton explains the importance of this analysis to producers, "Operating costs in the mining industry have risen rapidly over recent years, but now that prices have dropped there is a renewed focus from mining companies on reducing costs and trying to protect margins."
"To compare overall operating margins, we examine total cash cost plus sustaining capital. For producers to accurately assess cash margins at the mine level, just examining the basic C1™ operating cost can be misleading. Total cash cost plus sustaining capital is a better full cash cost measure. This comprises the C1™ operating cash cost plus indirect cash costs such as royalties & levies, and the cash spend on capital required to sustain production." The industry standard C1™ cost is the direct cash cost of mining, processing and offsite realisation costs, including any by-product credits. It is primarily used to compare the relative underlying cost efficiency of production between mines.
Mr Hulton concludes, "Individual mining companies will be variously affected depending on their exposure to the different commodities, and where their particular mines sit on the respective industry cost/margin curves. As price takers, there are limited tunes the producers can play and one of them will be to slow down on capital spend, and prioritise the commodities that have the best returns."
*Note: The base and precious metals commodities covered in the analysis are copper, nickel, zinc and gold. The bulk commodities covered in the analysis are metallurgical export coal, thermal export coal, bauxite and iron ore.
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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Ministry of Mines - Canada
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Parliament of New Zealand
- White Energy Company Limited
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- Wilmar Investment Holdings
- Indian Oil Corporation Limited
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- TeaM Sual Corporation - Philippines
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- Cement Manufacturers Association - India
- Mjunction Services Limited - India
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Latin American Coal - Colombia
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- VISA Power Limited - India
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- Mercuria Energy - Indonesia
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Marubeni Corporation - India
- ASAPP Information Group - India
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Directorate Of Revenue Intelligence - India
- Tamil Nadu electricity Board
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- SMG Consultants - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- India Bulls Power Limited - India
- Bharathi Cement Corporation - India
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- McConnell Dowell - Australia
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- Ambuja Cements Ltd - India
- Bhushan Steel Limited - India
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Bhoruka Overseas - Indonesia
- Merrill Lynch Commodities Europe
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- The University of Queensland
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- CIMB Investment Bank - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Australian Coal Association
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Central Electricity Authority - India
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
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