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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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Sunday, 26 October 14
CAPE'S STRONG PERFORMANCE PUSHES BDI INDEX UPWARDS
COALspot.com: The BDI was up by 26.27 pct and closed at 1192 points week and week. The Cape size performance has pushed up BDI and Cape size index ...
Friday, 24 October 14
WEEKLY U.S COAL PRODUCTION DOWN 2.7% FOR THE WEEK ENDING OCTOBER 18
COALspot.com – United States the world's one of largest coal producers, produced approximately 18.7 million short tons (mmst) of coal in ...
Thursday, 23 October 14
THE BEARS, HOWEVER, STILL CRY; FOR HOW LONG WILL IT LAST? - FEARNLEYS
Handy
"We experience a typical oversupply of ships in the Atlantic which causing rates to slide. In the USG it is just enough cargoes to kee ...
Wednesday, 22 October 14
MARKET INSIGHT - THEODORE NTALAKOS, INTERMODAL
ECO designs - revisited
The ECO vessels are already here but the oil and bunker prices are plummeting to their cheapest level since 2010. Is this ...
Wednesday, 22 October 14
CAPESIZE MARKET REMAINED UNDER PRESSURE
COALspot.com: The Dry Bulk market closed on the red for yet another week although following Friday sentiment has started to improve on the back of ...
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- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
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- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Thiess Contractors Indonesia
- Ministry of Mines - Canada
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- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- Wilmar Investment Holdings
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Kaltim Prima Coal - Indonesia
- Indian Oil Corporation Limited
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- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
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- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Tamil Nadu electricity Board
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- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- Kumho Petrochemical, South Korea
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
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- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- Minerals Council of Australia
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Edison Trading Spa - Italy
- Star Paper Mills Limited - India
- European Bulk Services B.V. - Netherlands
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- Thai Mozambique Logistica
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- Bangladesh Power Developement Board
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- Australian Coal Association
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- The State Trading Corporation of India Ltd
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- Indonesian Coal Mining Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- Kapuas Tunggal Persada - Indonesia
- Eastern Coal Council - USA
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- Mintek Dendrill Indonesia
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- London Commodity Brokers - England
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- White Energy Company Limited
- Meralco Power Generation, Philippines
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- Ministry of Transport, Egypt
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- Toyota Tsusho Corporation, Japan
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- The Treasury - Australian Government
- Bukit Makmur.PT - Indonesia
- Electricity Generating Authority of Thailand
- Kalimantan Lumbung Energi - Indonesia
- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- Goldman Sachs - Singapore
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- McConnell Dowell - Australia
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Anglo American - United Kingdom
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- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- Bukit Baiduri Energy - Indonesia
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Planning Commission, India
- AsiaOL BioFuels Corp., Philippines
- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Videocon Industries ltd - India
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
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- San Jose City I Power Corp, Philippines
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Timah Investasi Mineral - Indoneisa
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- Wood Mackenzie - Singapore
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