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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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Saturday, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
A shift in imports from Asia to Europe led to significant volatility in liquefied natural gas shipping last year, prompting industry experts to urg ...
Friday, 17 March 23
INDONESIAN COAL PRICE REFERENCE UP AROUND 2.17% IN MARCH 2023
COALspot.com: Indonesian Coal Price Reference up around 2.17% in March 2023.
According to the new HBA regulation No. 41.K/MB.0 ...
Saturday, 11 March 23
MARKET INSIGHT - INTERMODAL
Uncertainty over the recovery of Chinese demand, demand destruction in Europe, as well as weather conditions will pivot the LNG market this summer. ...
Wednesday, 08 March 23
INDONESIAN COAL REFERENCE PRICE FORMULA HAS OFFICIALLY CHANGED
Indonesian Minister of Energy and Mineral Resources has officially changed the guideline for determining the benchmark price for the sale of coal c ...
Thursday, 02 March 23
INDIA'S SEABORNE CRUDE OIL IMPORTS IN 2022 INCREASED BY 11.5% YOY - BANCHERO COSTA
2022 has turned out to be a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession, Banchero Costa ...
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- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Petron Corporation, Philippines
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Videocon Industries ltd - India
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Globalindo Alam Lestari - Indonesia
- Energy Development Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Independent Power Producers Association of India
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Mjunction Services Limited - India
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Electricity Generating Authority of Thailand
- Coal and Oil Company - UAE
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IHS Mccloskey Coal Group - USA
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Pendopo Energi Batubara - Indonesia
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Savvy Resources Ltd - HongKong
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- OPG Power Generation Pvt Ltd - India
- The University of Queensland
- Marubeni Corporation - India
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Global Coal Blending Company Limited - Australia
- Edison Trading Spa - Italy
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Price Waterhouse Coopers - Russia
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Ind-Barath Power Infra Limited - India
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Kobexindo Tractors - Indoneisa
- Kepco SPC Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Siam City Cement - Thailand
- Miang Besar Coal Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Heidelberg Cement - Germany
- Gujarat Mineral Development Corp Ltd - India
- Grasim Industreis Ltd - India
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Meenaskhi Energy Private Limited - India
- Ambuja Cements Ltd - India
- Oldendorff Carriers - Singapore
- Central Java Power - Indonesia
- Rio Tinto Coal - Australia
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Tata Chemicals Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- Alfred C Toepfer International GmbH - Germany
- Chettinad Cement Corporation Ltd - India
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- LBH Netherlands Bv - Netherlands
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Semirara Mining Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Jaiprakash Power Ventures ltd
- Riau Bara Harum - Indonesia
- ASAPP Information Group - India
- Makarim & Taira - Indonesia
- Iligan Light & Power Inc, Philippines
- Indian Energy Exchange, India
- Holcim Trading Pte Ltd - Singapore
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Thai Mozambique Logistica
- Parliament of New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Standard Chartered Bank - UAE
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Carbofer General Trading SA - India
- Larsen & Toubro Limited - India
- San Jose City I Power Corp, Philippines
- Eastern Energy - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Port Waratah Coal Services - Australia
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- Planning Commission, India
- Neyveli Lignite Corporation Ltd, - India
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Kohat Cement Company Ltd. - Pakistan
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Altura Mining Limited, Indonesia
- Wilmar Investment Holdings
- Sindya Power Generating Company Private Ltd
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Aditya Birla Group - India
- Therma Luzon, Inc, Philippines
- Borneo Indobara - Indonesia
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