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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- Indika Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Latin American Coal - Colombia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Mercuria Energy - Indonesia
- Riau Bara Harum - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Indian Oil Corporation Limited
- Energy Link Ltd, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Iligan Light & Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Carbofer General Trading SA - India
- Sinarmas Energy and Mining - Indonesia
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Indogreen Group - Indonesia
- PTC India Limited - India
- LBH Netherlands Bv - Netherlands
- Kumho Petrochemical, South Korea
- Coal and Oil Company - UAE
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- MS Steel International - UAE
- Central Electricity Authority - India
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- VISA Power Limited - India
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- CNBM International Corporation - China
- Bhatia International Limited - India
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- ASAPP Information Group - India
- Agrawal Coal Company - India
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Bayan Resources Tbk. - Indonesia
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Mjunction Services Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Parry Sugars Refinery, India
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Kapuas Tunggal Persada - Indonesia
- White Energy Company Limited
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Sindya Power Generating Company Private Ltd
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Samtan Co., Ltd - South Korea
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Wilmar Investment Holdings
- The Treasury - Australian Government
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Central Java Power - Indonesia
- Coastal Gujarat Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Antam Resourcindo - Indonesia
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- OPG Power Generation Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- Bangladesh Power Developement Board
- Economic Council, Georgia
- The University of Queensland
- CIMB Investment Bank - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Power Finance Corporation Ltd., India
- Ministry of Transport, Egypt
- Australian Coal Association
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Indonesian Coal Mining Association
- ICICI Bank Limited - India
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Global Coal Blending Company Limited - Australia
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Bhushan Steel Limited - India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- GMR Energy Limited - India
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Kepco SPC Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Vedanta Resources Plc - India
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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