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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, 08 January 23
ELEVATED COAL PRICE A DRAG ON MARGINS OF DOMESTIC BASE METAL PLAYERS: ICRA
The increased price of coal continue to be a drag on the margin of domestic base metal players with no immediate relief in sight, rating agency ICR ...
Monday, 02 January 23
CHINA’S COAL CONSUMPTION TO PEAK BY 2035: REPORT - REUTERS
China’s primary energy consumption is likely to peak at nearly 6.03 billion tonnes of standard coal between 2030 and 2035, refining giant Chi ...
Thursday, 29 December 22
INDIA'S COAL DEMAND LIKELY TO PEAK BETWEEN 2030-2035: MINISTER - ANI
The demand for coal in India will continue and is likely to peak between 2030-2035, Union Minister of Coal, Mines, and Parliamentary Affairs Pralha ...
Thursday, 29 December 22
RIO TINTO AND PARTNERS COULD RECEIVE AS MUCH AS $450M IN GOVERNMENT COMPENSATION FOR COAL PRICE CAP - THE GUARDIAN
Compensation payments for the Gladstone power plant remain the sticking point in the federal government’s coal price cap compensation negotia ...
Wednesday, 28 December 22
MARKET INSIGHT - INTERMODAL
The United Nations Conference on Trade and Development (UNCTAD) published a Global Trade Update on December 13th highlighting that global trade wou ...
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- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- Interocean Group of Companies - India
- Economic Council, Georgia
- The University of Queensland
- Directorate General of MIneral and Coal - Indonesia
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Krishnapatnam Port Company Ltd. - India
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Electricity Generating Authority of Thailand
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Parliament of New Zealand
- Edison Trading Spa - Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sical Logistics Limited - India
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Coal and Oil Company - UAE
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Bukit Baiduri Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
- Pendopo Energi Batubara - Indonesia
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- Jorong Barutama Greston.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Australian Coal Association
- Sojitz Corporation - Japan
- Carbofer General Trading SA - India
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- Georgia Ports Authority, United States
- Anglo American - United Kingdom
- Sarangani Energy Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Ministry of Finance - Indonesia
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- PTC India Limited - India
- Planning Commission, India
- Tamil Nadu electricity Board
- Orica Australia Pty. Ltd.
- Ministry of Transport, Egypt
- White Energy Company Limited
- Therma Luzon, Inc, Philippines
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Antam Resourcindo - Indonesia
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Posco Energy - South Korea
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- South Luzon Thermal Energy Corporation
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Ind-Barath Power Infra Limited - India
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- Gujarat Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- Minerals Council of Australia
- Standard Chartered Bank - UAE
- Larsen & Toubro Limited - India
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- Eastern Energy - Thailand
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Central Java Power - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- Samtan Co., Ltd - South Korea
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- Xindia Steels Limited - India
- LBH Netherlands Bv - Netherlands
- Aditya Birla Group - India
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Thai Mozambique Logistica
- Bhushan Steel Limited - India
- ASAPP Information Group - India
- Binh Thuan Hamico - Vietnam
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
- Kideco Jaya Agung - Indonesia
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- CIMB Investment Bank - Malaysia
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Jaiprakash Power Ventures ltd
- Borneo Indobara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- MS Steel International - UAE
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Chamber of Mines of South Africa
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- Bharathi Cement Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Karaikal Port Pvt Ltd - India
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
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