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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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Wednesday, 12 November 14
PANAMAX: WITNESSED A FAIRLY STABLE MARKET IN THE ATLANTIC
COALspot.com: Despite the fact that the Dry Bulk market noted another weekly increase, clouds of uncertainty returned mid-week onwards, as the mini ...
Wednesday, 12 November 14
SHIPPING MARKET INSIGHT - CHRISTOPHER T. WHITTY
COALspot.com: The fight continues between the low-cost iron ore producers and the big three: Vale, Rio Tinto and BHP Billiton. We are moving into a ...
Tuesday, 11 November 14
FACING CHALLENGES AND MEETING OPPORTUNITIES - INTERNATIONAL EPC CONFERENCE & EXHIBITION
Press Release: SKYCONNECTION and TRANSEVENT, which is fully supported by the Institution of Engineers Indonesia and Ministry of Industry of the Rep ...
Tuesday, 11 November 14
NEWCASTLE COAL SWAP CLOSED AT $ 52.65 FOR Q1' 15 DELIVERY
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery decreased US$ 2.83 (-5.10%) month over month and US$ 1.35 (-2.50%) week ove ...
Tuesday, 11 November 14
PORT OF NEWCASTLE'S OCTOBER COAL SHIPMENTS SLIPPED 7.40% M-O-M
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1,115.7 mil ...
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- Bharathi Cement Corporation - India
- Antam Resourcindo - Indonesia
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- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
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- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
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- Rio Tinto Coal - Australia
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- White Energy Company Limited
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- Iligan Light & Power Inc, Philippines
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- Commonwealth Bank - Australia
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- Lanco Infratech Ltd - India
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- Malabar Cements Ltd - India
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- Meralco Power Generation, Philippines
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- Jindal Steel & Power Ltd - India
- Minerals Council of Australia
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
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- New Zealand Coal & Carbon
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- European Bulk Services B.V. - Netherlands
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- SN Aboitiz Power Inc, Philippines
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- Billiton Holdings Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
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- Energy Link Ltd, New Zealand
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- Ministry of Mines - Canada
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
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- Meenaskhi Energy Private Limited - India
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Madhucon Powers Ltd - India
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- Ministry of Transport, Egypt
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
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- IEA Clean Coal Centre - UK
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- CNBM International Corporation - China
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- TNB Fuel Sdn Bhd - Malaysia
- Alfred C Toepfer International GmbH - Germany
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- Bangladesh Power Developement Board
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- The University of Queensland
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- Singapore Mercantile Exchange
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- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- India Bulls Power Limited - India
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- Mintek Dendrill Indonesia
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Kepco SPC Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Straits Asia Resources Limited - Singapore
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- MS Steel International - UAE
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- Bhatia International Limited - India
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- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Bhushan Steel Limited - India
- Cement Manufacturers Association - India
- Global Green Power PLC Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
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- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Coalindo Energy - Indonesia
- Wood Mackenzie - Singapore
- Ind-Barath Power Infra Limited - India
- Eastern Energy - Thailand
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Renaissance Capital - South Africa
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- Chamber of Mines of South Africa
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- GN Power Mariveles Coal Plant, Philippines
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