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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, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- Thiess Contractors Indonesia
- Iligan Light & Power Inc, Philippines
- Economic Council, Georgia
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Holcim Trading Pte Ltd - Singapore
- Sojitz Corporation - Japan
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Energy Development Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- PTC India Limited - India
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- CIMB Investment Bank - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- South Luzon Thermal Energy Corporation
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Samtan Co., Ltd - South Korea
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- The University of Queensland
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Marubeni Corporation - India
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- SMC Global Power, Philippines
- Xindia Steels Limited - India
- Parry Sugars Refinery, India
- Savvy Resources Ltd - HongKong
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Deloitte Consulting - India
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Africa Commodities Group - South Africa
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Australian Commodity Traders Exchange
- Toyota Tsusho Corporation, Japan
- Rio Tinto Coal - Australia
- White Energy Company Limited
- Maheswari Brothers Coal Limited - India
- Vizag Seaport Private Limited - India
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- Electricity Authority, New Zealand
- MS Steel International - UAE
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Bangladesh Power Developement Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- Kobexindo Tractors - Indoneisa
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Attock Cement Pakistan Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Edison Trading Spa - Italy
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- Australian Coal Association
- Planning Commission, India
- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Riau Bara Harum - Indonesia
- Orica Mining Services - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Kideco Jaya Agung - Indonesia
- GVK Power & Infra Limited - India
- Sindya Power Generating Company Private Ltd
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