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Tuesday, 30 December 14
INDIA INC TO BENEFIT AS IMPORTED COAL PRICES SET TO FALL - RAHUL PRITHIANI
The Hindu: India‘s coal import volumes are set to rise by over 30 per cent over the next two years to 214 million tonnes in 2015-16, as domestic supply falls short of surging demand.
However, globally, the situation is just the reverse. Severe oversupply with few takers will drag down prices of both thermal and coking coal by about 25 per cent. This will slash fuel costs and support the profitability of India Inc. Lower prices will also cap India’s coal import bill, unlike a 17 per cent annual growth witnessed over the last five years.
Supply soars
Miners in major coal exporting countries like Indonesia and Australia have significantly ramped up investments over the past five years, anticipating steady off take from major importers such as India and China. For example, coal mining investments in Australia are estimated to have doubled to about $50 billion over 2009 to 2013 from about $25 billion over 2003 to 2008. Moreover, domestic coal supply in China is also likely to increase as its railway capacity for hauling coal expands by nearly one-third to three billion tonne by 2020. This will ease transportation bottlenecks in that country.
Thus, while coal supplies will grow, there are likely to be few takers.
Even as miners stack up supplies, off take by major consumers including China, the U.S. and Europe is set to post a muted rise. Weak GDP growth, a gradual shift to cleaner fuels and rising energy efficiencies will curb demand.
The most telling fact is that China, the world’s largest importer of coal, has placed import curbs, will further restrict demand. Over the last three months, it has banned imports of low-grade coal, while imposing import duties on both thermal (six per cent) and coking coal (three per cent). Global economic weakness and China’s measures to move away from an investment-led growth model will also halve the growth in coking coal importsover the next five years.
Thus, oversupply in the global coal market, along with weakening currencies in exporting countries, is expected to drag down thermal and coking coal prices by 25 per cent approximately over the next two years to $65 per tonne and $115 per tonne by 2015, respectively.
Advantage India
For India, which has scarce domestic energy resources, the above changing dynamics certainly bode well. India’s coal import volumes are expected to rise by 33 per cent over the next two years, as domestic production lags demand. In such a scenario, falling global coal prices will help India Inc.
In the power sector, projects running on imported coal — including that of Tata Power, Adani Power and Essar Power — will benefit the most from sliding coal prices. These projects have incurred huge losses since 2012-13 when Indonesian coal prices almost doubled following a change in regulations. However, with imported coal prices plummeting, returns of such projects are expected to improve. As per our analysis, for a project operating on imported coal, even a one per cent fall in fuel costs will drive up equity returns by 25 basis points.
Even power projects based on domestic coal will benefit, as they can increase blending of imported coal and boost utilisation rates. In particular, plant-load factors (PLFs) of post-2009 power projects, which languished at just 51 per cent in 2013-14, will improve gradually.
Similarly, input costs for cement and metal manufacturers will decline, supporting their profitability. For cement players, reliance on imported coal has gradually risen — reaching 30-35 per cent of total coal consumption in 2013-14, as the power sector was prioritised for domestic coal supply. As demand growth slowed and operating costs rose, the industry’s operating margins fell to 15 per cent in 2013-14 from 28 per cent in 2009-10. Therefore, falling imported coal prices, will reduce cost pressures for the sector through lower fuel costs, which will decline by 3-4 per cent in 2014-15. In particular, cement plants, which have higher reliance on coal imports, will witness a much sharper reduction in fuel costs, as imported coal prices are set to fall by 15-17 per cent in 2014-15.
The decline in global coking coal prices is good news even for steelmakers beset by muted demand and global overcapacity. With good-quality domestic supply being scarce, Indian steelmakers import nearly 70 per cent of their coking coal requirements and coal accounts for 30 per cent of their manufacturing costs. Thus, a sharp decline in global coking coal prices will drag down operating costs by 6-8 per cent in 2014-15 and thereby support profitability.
There are also some macroeconomic advantages. Most importantly, despite the rise in coal import (volumes), the value (or the import bill) will only rise marginally at a CAGR of one per cent over the next two years. This contrasts sharply vis-à-vis the past 5 years, when the bill had risen at a 17 per cent CAGR to Rs.888 billion (approximately US$ 13,950,428,156).
The author is Director, CRISIL.
Source: The Hindu
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Monday, 08 December 14
GOVERMENT TO WITHDRAW CNC STATUS OVER SUSPECTED FLAWS - THE JAKARTA POST
The Energy and Mineral Resources Ministry’s directorate general for mineral and coal plans to review the clean and clear (CnC) status held by ...
Monday, 08 December 14
FOB NEWCASTLE COAL SWAPS SLIP W-O-W AND M-O-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery closed at US$ 52.10 on 5 December after losing US$ 0.55 (-1.04%) month over ...
Sunday, 07 December 14
SUPRAMAX S8 ROUTE SLIGHTLY INCREASED WEEK ON WEEK
COALspot.com: The BDI continued its fall as cape index fell heavily week on week.
The BDI lost around14.83 pct within last five working day an ...
Saturday, 06 December 14
TANKER FLOATING STORAGE PLAYS COULD COME INTO PLAY IF VLCC RATES STAY AT CURRENT LEVEL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Contango: A phenomenon in commodities futures price curves where the delivery price of a futures contract is greater than the current price. With t ...
Saturday, 06 December 14
MUNDRA PORT MAKES HISTORY BY HANDLING THE LARGEST BULK CARRIER TO CALL ON WEST COAST OF INDIA
COALspot.com: Adani Ports & SEZ Ltd, India’s largest port developer and part of Adani Group, yesterday said its Mundra Port successf ...
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- White Energy Company Limited
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- Thai Mozambique Logistica
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- CIMB Investment Bank - Malaysia
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Eastern Energy - Thailand
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- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- TNB Fuel Sdn Bhd - Malaysia
- Chettinad Cement Corporation Ltd - India
- International Coal Ventures Pvt Ltd - India
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Global Coal Blending Company Limited - Australia
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- Ministry of Finance - Indonesia
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Samtan Co., Ltd - South Korea
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- Energy Development Corp, Philippines
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- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
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- Sojitz Corporation - Japan
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- Singapore Mercantile Exchange
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Meralco Power Generation, Philippines
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- Parliament of New Zealand
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- Baramulti Group, Indonesia
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- MS Steel International - UAE
- ASAPP Information Group - India
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- Larsen & Toubro Limited - India
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- Formosa Plastics Group - Taiwan
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- PTC India Limited - India
- McConnell Dowell - Australia
- Coal and Oil Company - UAE
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- Planning Commission, India
- Australian Coal Association
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- Australian Commodity Traders Exchange
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- Makarim & Taira - Indonesia
- Interocean Group of Companies - India
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- Indian Oil Corporation Limited
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- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- Kaltim Prima Coal - Indonesia
- Wood Mackenzie - Singapore
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Grasim Industreis Ltd - India
- SMC Global Power, Philippines
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Tata Chemicals Ltd - India
- Global Green Power PLC Corporation, Philippines
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Minerals Council of Australia
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Metalloyd Limited - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- GAC Shipping (India) Pvt Ltd
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Romanian Commodities Exchange
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- India Bulls Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
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- Bhoruka Overseas - Indonesia
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- Power Finance Corporation Ltd., India
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
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