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Friday, 28 September 18
FITCH RATINGS: METALLURGICAL COAL MINERS MAY CURB COSTS AS PRICES SLIP
Strong cost inflation in the global metallurgical coal sector suggests that miners may focus on cost controls as prices decline from their current high levels over the next 18 months, say Fitch Ratings and CRU. However, mining companies rated by Fitch are well-positioned for any potential squeeze on margins, as their costs are relatively low by global standards and, in most cases, their diversified business operations limit exposure to the sector.
CRU estimates that global costs in the metallurgical coal sector increased by 18% in 2017 and continued to rise in 2018. Severe weather has played a role in Australia, causing supply-chain disruption that led to demurrage penalties and increased storage costs for unshipped coal. However, costs have also been pushed up globally by higher oil prices and attempts by mining companies to maximise production to take advantage of high prices.
Coking coal prices are currently sufficiently high that cost inflation has not undermined profitability. CRU estimates that the seaborne industry generated an average cash margin of 40% in 2016-2017, and profitability has remained very strong this year.
The metallurgical coal market is unlikely to become oversupplied in the near term, and Fitch does not expect prices to fall deep into the cost curve, as they did during 2014-2016. However, prices have already eased off from their peak of USD260/tonne in 4Q16, and are likely to decline further as supply constraints continue to ease. Fitch’s current assumptions are that hard coking coal prices will average USD185/tonne this year and USD140/tonne thereafter. These declines could put pressure on some less competitive mining companies to reduce costs to protect margins.
Among Fitch-rated companies, Teck Resources (BB+/Positive) has the largest exposure to the metallurgical coal sector, which accounted for 60% of its segment EBITDA in the 12 months to 30 June 2018. The company is among those that have increased use of contractors and rented more mining equipment to raise short-term output, which has pushed up marginal costs. Nevertheless, Teck is still in the lower half of the global cost curve (FOB port) and its costs remain lower in US dollar terms than in 2014. Teck has also taken advantage of strong margins and cash flow to reduce leverage. The main credit issue facing the company is the prospect of continued project spending and its funding resulting in weaker cash flows and higher financial leverage.
BHP Billiton (A/Stable) and Anglo American (BBB-/Stable) also have significant metallurgical coal assets, mostly located in Australia, where coal mines are generally relatively low cost by global standards. BHP and Anglo also have diversified operations, with metallurgical coal accounting for only around 16% of BHP Billiton’s revenue and 17% of Anglo’s in the financial year ending June 2017. There could be increased focus on improving efficiency in the Australian coal sector, as already signalled by some companies, but CRU and the Australian government expect production to continue to grow strongly over the next four years.
Meanwhile, mining service companies and earthmoving equipment manufacturers should continue to benefit from rising demand and a better pricing environment as miners continue with new projects and increase production. Emeco (B/Stable), which has the largest exposure to metallurgical coal among Fitch-rated companies, reported improved EBITDA margin as the commodity sector recovered. It also improved its leverage position. Further leverage improvements are likely in 2019-2021 due to equity-funded acquisitions and a tight rental equipment market in Australia.
Source: Fitch Ratings
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Friday, 14 December 18
KOSPO INVITED BIDS FOR 320,000 MT OF LOW CALORIFIC VALUE COAL
COALspot.com: South Korea state-owned utility Korea Southern Power Co. Ltd (KOSPO) issued a tender for 320,000 MT of min 4,300 kcal/kg NCV coal per ...
Friday, 14 December 18
KOSPO INVITES BIDS FOR 1,177,000 METRIC TONS OF COAL FOR Q1' 19 LOADING
COALspot.com: South Korea state-owned utility Korea Southern Power Co. Ltd (KOSPO) issued a tender for 701,000 MT of min 5,600 kcal/kg NCV coal and ...
Friday, 14 December 18
COAL IMPORT TO BE CHECKED BY RISING DOMESTIC PRODUCTION - FINANCIAL EXPRESS
The government’s effort to increase domestic coal production and power demand falling with the onset of the winters will check coal imports, ...
Thursday, 13 December 18
STRAITS AFFECTED BY TERRITORIAL DISPUTE BETWEEN SINGAPORE AND MALAYSIA - THE STANDARD CLUB
A recent territorial dispute has occurred between Singapore and Malaysia involving the Straits of Johor.
The Malaysian Attorney Gene ...
Wednesday, 12 December 18
SHIPPING MARKET INSIGHT - CHRISTOPHER WHITTY
China’s monthly iron ore imports dropped for the first time this year joined by declines in copper and soybeans as economic growth slows in t ...
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- Medco Energi Mining Internasional
- Bhatia International Limited - India
- Minerals Council of Australia
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Lanco Infratech Ltd - India
- ASAPP Information Group - India
- Asmin Koalindo Tuhup - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Planning Commission, India
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Wilmar Investment Holdings
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Vedanta Resources Plc - India
- Kaltim Prima Coal - Indonesia
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Globalindo Alam Lestari - Indonesia
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Sindya Power Generating Company Private Ltd
- Electricity Authority, New Zealand
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Indo Tambangraya Megah - Indonesia
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Jorong Barutama Greston.PT - Indonesia
- Bukit Makmur.PT - Indonesia
- Semirara Mining Corp, Philippines
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- Antam Resourcindo - Indonesia
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- CIMB Investment Bank - Malaysia
- Orica Australia Pty. Ltd.
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Iligan Light & Power Inc, Philippines
- Australian Coal Association
- Economic Council, Georgia
- Maharashtra Electricity Regulatory Commission - India
- Madhucon Powers Ltd - India
- Merrill Lynch Commodities Europe
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Grasim Industreis Ltd - India
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Baramulti Group, Indonesia
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Bharathi Cement Corporation - India
- Chettinad Cement Corporation Ltd - India
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Malabar Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Kobexindo Tractors - Indoneisa
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Straits Asia Resources Limited - Singapore
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Karbindo Abesyapradhi - Indoneisa
- Tamil Nadu electricity Board
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Mintek Dendrill Indonesia
- Maheswari Brothers Coal Limited - India
- Global Green Power PLC Corporation, Philippines
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Directorate Of Revenue Intelligence - India
- Sree Jayajothi Cements Limited - India
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- London Commodity Brokers - England
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- MS Steel International - UAE
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- Makarim & Taira - Indonesia
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Aditya Birla Group - India
- Holcim Trading Pte Ltd - Singapore
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Interocean Group of Companies - India
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
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