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Monday, 27 July 09
COKING COAL, IRON-ORE LIKELY TO BENEFIT NON-INTEGRATED STEEL PRODUCERS
 Economictimes reported that, The second half of the financial year 2008-09 was one of the toughest periods for steel companies, especially the non-integrated players without access to captive sources of raw material. The double whammy of falling sales realisation and higher input costs pulled down operating profit margins significantly.
The non-integrated producers continued to pay higher raw material prices as a part of long-term contracts signed during the beginning of the year. However, as old contracts have come to an end and new ones are being signed, these companies are breathing a sigh of relief.
The new contracts have taken into consideration the current market realty. The prices of two key inputs –
–iron ore and coking coal – have come down more than 50% in the spot market. As per reports, steel firms have signed long-term contracts for coking coal at around $110-120 per tonne and iron ore at $65-70 per tonne.
The new contract prices mark a decline of around two-thirds and one-third from their yearago levels for coking coal and iron ore, respectively. Steel prices have also fallen sharply during the same period. Because of these developments, it is essential to understand the impact of the new prices on the profitability of major steel producers, especially the non-integrated ones, for the next few quarters.
Steel prices in a number of countries have been regulated in past year, and India is no exception. Current international steel prices are 50% lower than year-ago levels and in India the decline has been 25-35 %. Accordingly, depending on the company’s market (domestic and overseas) exposure, the impact on profitability of new long-term contract will vary.
Going by international prices, a company with an operating margin of around 25% last year is expected to see a contraction in margin by around 1,000-1 ,300 basis points compared to year-ago levels. It means the fall in steel product prices outweighs the drop in input costs. The only solace for such a company is the improvement in margin from the previous two quarters. Sequentially, there could be an improvement of more than 500-1 ,000 basis points in the operating margin to 10-15 %.
For instance, many international steel producers reported either losses or a 5-8 % operating margin during the Mar ’09 quarter. Such companies are definitely going to see better days ahead. In India, Tata Steel, which has significant operations in Europe, is going to be one of the key beneficiaries. The operating margin of Corus, however, is not expected to exceed 2%. The new pricing will have a bigger impact on domestic companies.
Domestic steel prices have not fallen much due to government intervention and relatively higher domestic demand. Also, coking coal, which accounted for around two-thirds of raw material cost last year, has witnessed a much sharper decline in prices compared to iron ore. And most of the coking coal consumed in India is imported and its pricing depends more on the international environment rather than the domestic market. Hence new coking coal contract prices will capture the poor international market conditions.
The benefit of new long-term contracts for domestic players would depend on factors such as the extent of dependence on external suppliers for raw materials, actual contract prices and the month from which the contract became effective, among others. Higher the dependence on external suppliers, more the benefit.
Of the top five listed steel companies, JSW Steel and Ispat Industries are likely to benefit the most. The average operating margin from the September quarter onwards is expected to expand by around 1,000-1,500 basis points compared to the Mar ’09 quarter. The June quarter, however, will see a partial impact, depending on when the new contracts came into force.
Other top players that are likely to benefit are Steel Authority of India (Sail) and Jindal Steel & Power. Both of them are self-sufficient in iron ore but depend on outside suppliers for coking coal. The positive impact on the operating margin of these companies on account of the new prices would not be more than 500 basis points though.
Source: Economic Times - India Times
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Thursday, 16 July 09
JAPAN'S J - POWER STARTS OPS AT NEW 600 MW COAL UNIT
Reuters, a worlds leading news agency reported that, Electric Power Development Co (J-Power) said on Thursday it started commercial operations at it ...
Thursday, 16 July 09
DELIVERY OF COAL MINE EXPLORATION THROUGH NEWCASTLE PORT ROSE 11 PERCENT
July 16th, 2009 Newcastle is a port in Australia that provides services in the delivery of coal from Australia to other countries. Newcastle port ha ...
Thursday, 16 July 09
CIL KEEN ON JOINT VENTURES
* Targets to raise production by 10 m tonnes by 2012
* Plans to tap reserves of abandoned mines
The Hindu, an Indian news paper reported that, t ...
Wednesday, 15 July 09
COAL INDIA INVITES EOI FOR COAL MINING IN FOREIGN COUNTRIES
Economict Tmes reported that, Coal India, a leading PSU with a status of Navratna, today, invited Expression of Interest for selection of strategic ...
Wednesday, 15 July 09
BANGLADESH TO IMPORT COAL FROM INDIA FOR 1 MORE YR
Bangladesh has decided to import coal from neighbour India for another year to save foreign exchange and time, a commerce ministry official said on ...
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- Bhoruka Overseas - Indonesia
- The University of Queensland
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- GVK Power & Infra Limited - India
- Kumho Petrochemical, South Korea
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- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- Singapore Mercantile Exchange
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- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Attock Cement Pakistan Limited
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- Leighton Contractors Pty Ltd - Australia
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- Tamil Nadu electricity Board
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Miang Besar Coal Terminal - Indonesia
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- Parry Sugars Refinery, India
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- Tata Chemicals Ltd - India
- Therma Luzon, Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Commonwealth Bank - Australia
- Georgia Ports Authority, United States
- Thai Mozambique Logistica
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- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- McConnell Dowell - Australia
- Jindal Steel & Power Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- ICICI Bank Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Latin American Coal - Colombia
- Energy Link Ltd, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Bukit Baiduri Energy - Indonesia
- PowerSource Philippines DevCo
- Africa Commodities Group - South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- PTC India Limited - India
- Planning Commission, India
- London Commodity Brokers - England
- Vedanta Resources Plc - India
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
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- Mjunction Services Limited - India
- Interocean Group of Companies - India
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- Renaissance Capital - South Africa
- White Energy Company Limited
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- Asmin Koalindo Tuhup - Indonesia
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Power Finance Corporation Ltd., India
- Ministry of Finance - Indonesia
- Electricity Authority, New Zealand
- Kideco Jaya Agung - Indonesia
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Star Paper Mills Limited - India
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- Australian Commodity Traders Exchange
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- Riau Bara Harum - Indonesia
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- Thiess Contractors Indonesia
- The State Trading Corporation of India Ltd
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Wilmar Investment Holdings
- Bharathi Cement Corporation - India
- GMR Energy Limited - India
- Energy Development Corp, Philippines
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- South Luzon Thermal Energy Corporation
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
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- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
- Kaltim Prima Coal - Indonesia
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Neyveli Lignite Corporation Ltd, - India
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- Borneo Indobara - Indonesia
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- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- CNBM International Corporation - China
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- Petron Corporation, Philippines
- Eastern Coal Council - USA
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- Kapuas Tunggal Persada - Indonesia
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
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- Indonesian Coal Mining Association
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- Global Green Power PLC Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
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- Mintek Dendrill Indonesia
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