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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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Friday, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
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- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Kaltim Prima Coal - Indonesia
- Eastern Coal Council - USA
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- SN Aboitiz Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Agrawal Coal Company - India
- Minerals Council of Australia
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- Riau Bara Harum - Indonesia
- Metalloyd Limited - United Kingdom
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Formosa Plastics Group - Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Mercator Lines Limited - India
- Savvy Resources Ltd - HongKong
- Wood Mackenzie - Singapore
- Indian Energy Exchange, India
- Indo Tambangraya Megah - Indonesia
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Maheswari Brothers Coal Limited - India
- Barasentosa Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Videocon Industries ltd - India
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Alfred C Toepfer International GmbH - Germany
- Sinarmas Energy and Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- SMG Consultants - Indonesia
- Makarim & Taira - Indonesia
- Singapore Mercantile Exchange
- White Energy Company Limited
- Energy Development Corp, Philippines
- Marubeni Corporation - India
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Coastal Gujarat Power Limited - India
- Independent Power Producers Association of India
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Iligan Light & Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Directorate General of MIneral and Coal - Indonesia
- Altura Mining Limited, Indonesia
- Therma Luzon, Inc, Philippines
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
- Power Finance Corporation Ltd., India
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Planning Commission, India
- Central Java Power - Indonesia
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Heidelberg Cement - Germany
- Bulk Trading Sa - Switzerland
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Medco Energi Mining Internasional
- Anglo American - United Kingdom
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Uttam Galva Steels Limited - India
- India Bulls Power Limited - India
- Orica Mining Services - Indonesia
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Kideco Jaya Agung - Indonesia
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Standard Chartered Bank - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Bangladesh Power Developement Board
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- GMR Energy Limited - India
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Interocean Group of Companies - India
- Ambuja Cements Ltd - India
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Renaissance Capital - South Africa
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Toyota Tsusho Corporation, Japan
- Borneo Indobara - Indonesia
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- VISA Power Limited - India
- Malabar Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- CNBM International Corporation - China
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