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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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Friday, 07 November 14
U.S. PRODUCED 85.60 MILLION SHORT TONS OF COAL IN OCTOBER, UP 2.88% M-O-M
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.0 million short tons (mmst) of coal ...
Thursday, 06 November 14
THE ATLANTIC HAS REMAINED STRONG WITH A HEALTHY SUPPLY OF NEW CARGOES
Handy
This week has continued its slow trend in both hemispheres and even though rates are a bit up w-o-w it is not a clear sign for any improvem ...
Wednesday, 05 November 14
CAPESIZE SEGMENT ENJOYED FIRMING RATES ACROSS BOTH BASINS
Following a fantastic week in terms of rate performance for Capes, the Dry Bulk market managed to note another positive weekly closing, which stron ...
Wednesday, 05 November 14
SHIPPING MARKET INSIGHT - PANOS TSILINGIRIS
COALspot.com: The steep appreciation in dry bulker values between late 2012 and March 2014 resulted in unrealistically expensive ship values compar ...
Tuesday, 04 November 14
INDONESIAN COAL SWAPS FOR 2015 DELIVERIES SHOW A WEAK TREND
COALspot.com: Indonesian coal swaps for delivery Q4' 2014 lost month on month and gained day on day and week on week, the trend was same as las ...
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- Aboitiz Power Corporation - Philippines
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- Mintek Dendrill Indonesia
- Price Waterhouse Coopers - Russia
- Medco Energi Mining Internasional
- Iligan Light & Power Inc, Philippines
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- Therma Luzon, Inc, Philippines
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- PTC India Limited - India
- Leighton Contractors Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
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- Alfred C Toepfer International GmbH - Germany
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- Carbofer General Trading SA - India
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- Independent Power Producers Association of India
- MS Steel International - UAE
- Commonwealth Bank - Australia
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- PNOC Exploration Corporation - Philippines
- Savvy Resources Ltd - HongKong
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- Parry Sugars Refinery, India
- Latin American Coal - Colombia
- Asmin Koalindo Tuhup - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
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- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Power Finance Corporation Ltd., India
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- Indogreen Group - Indonesia
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- Coal and Oil Company - UAE
- Ind-Barath Power Infra Limited - India
- SMG Consultants - Indonesia
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
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- Coalindo Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Wood Mackenzie - Singapore
- PowerSource Philippines DevCo
- Bulk Trading Sa - Switzerland
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- PetroVietnam Power Coal Import and Supply Company
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Eastern Coal Council - USA
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- Energy Development Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Sojitz Corporation - Japan
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Minerals Council of Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Straits Asia Resources Limited - Singapore
- Chamber of Mines of South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- Central Java Power - Indonesia
- Sindya Power Generating Company Private Ltd
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Romanian Commodities Exchange
- Bukit Baiduri Energy - Indonesia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
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- Miang Besar Coal Terminal - Indonesia
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- IEA Clean Coal Centre - UK
- Global Green Power PLC Corporation, Philippines
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bukit Makmur.PT - Indonesia
- Africa Commodities Group - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Sakthi Sugars Limited - India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- Kartika Selabumi Mining - Indonesia
- The University of Queensland
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Lanco Infratech Ltd - India
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- Singapore Mercantile Exchange
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Kepco SPC Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Rio Tinto Coal - Australia
- Globalindo Alam Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Goldman Sachs - Singapore
- Australian Coal Association
- Kaltim Prima Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bayan Resources Tbk. - Indonesia
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Parliament of New Zealand
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- Planning Commission, India
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