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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, 31 October 14
BUKIT ASAM'S NET PROFIT ROSE 27.42% FOR THE PERIOD JANUARY - SEPTEMBER 2014
COALspot.com: Publicly listed coal miner Bukit Asam reported solid profits in the first nine months of 2014 year.
Coal miner Bukit Asam manage ...
Friday, 31 October 14
U.S PRODUCED AROUND 19.3 MMST OF COAL IN A WEEK
COALspot.com – United States the world's one of largest coal producers, produced approximately 19.3 million short tons (mmst) of coal in ...
Thursday, 30 October 14
COAL & GRAINS SUPPORT PANAMAX AND IRON ORE SUPPORTS CAPES
Handy
The Atlantic market has been flat this week. Rates are up about US$ 200 from last week on the TA´s, but the volumes are about the sam ...
Thursday, 30 October 14
DOES A LOU ARBITRATION AGREEMENT FOR THE UNDERLYING CARGO CLAIM COMPLETELY REPLACE THE BILL OF LADING ARBITRATION CLAUSE? - INCE &CO
KNOWLEDGE TO ELEVATE
In the context of cargo claims brought under four bills of lading, the Commercial Court has recently considered whether a ...
Wednesday, 29 October 14
GOOD REASON WHY Q4 CAPESIZE OUTLOOK WAS SO BULLISH AT START OF THE YEAR - COMMODORE RESEARCH
COALspot.com: There was good reason why so many analysts' capesize outlook for Q4 was so very strong at the start of this year. Brazilian ...
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- Merrill Lynch Commodities Europe
- White Energy Company Limited
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- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
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- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Star Paper Mills Limited - India
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
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- TeaM Sual Corporation - Philippines
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- Chamber of Mines of South Africa
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
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- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Orica Mining Services - Indonesia
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- GMR Energy Limited - India
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- Bhushan Steel Limited - India
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- London Commodity Brokers - England
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- Toyota Tsusho Corporation, Japan
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- The State Trading Corporation of India Ltd
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
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- Ind-Barath Power Infra Limited - India
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- Economic Council, Georgia
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- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Price Waterhouse Coopers - Russia
- Global Coal Blending Company Limited - Australia
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- Kohat Cement Company Ltd. - Pakistan
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- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- VISA Power Limited - India
- Meralco Power Generation, Philippines
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- Baramulti Group, Indonesia
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
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- Electricity Authority, New Zealand
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
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- Alfred C Toepfer International GmbH - Germany
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- Pipit Mutiara Jaya. PT, Indonesia
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- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
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- PetroVietnam Power Coal Import and Supply Company
- Samtan Co., Ltd - South Korea
- GN Power Mariveles Coal Plant, Philippines
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- PTC India Limited - India
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- Indonesian Coal Mining Association
- Aditya Birla Group - India
- The University of Queensland
- Ministry of Finance - Indonesia
- Australian Coal Association
- Uttam Galva Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Bangladesh Power Developement Board
- Jindal Steel & Power Ltd - India
- Petron Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Gujarat Electricity Regulatory Commission - India
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Minerals Council of Australia
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- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Formosa Plastics Group - Taiwan
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- Latin American Coal - Colombia
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- Ministry of Mines - Canada
- Leighton Contractors Pty Ltd - Australia
- Goldman Sachs - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- Barasentosa Lestari - Indonesia
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
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- Central Electricity Authority - India
- Maheswari Brothers Coal Limited - India
- Sical Logistics Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Wilmar Investment Holdings
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- Billiton Holdings Pty Ltd - Australia
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- Miang Besar Coal Terminal - Indonesia
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- Tamil Nadu electricity Board
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