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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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Sunday, 02 December 18
TRADE WAR LEADING TO HEADWINDS FOR THE FRAGILE DRY BULK RECOVERY - PETER SAND, BIMCO
The first twelve weeks of the 2018/19 marketing year, which started on 1 September 2018, have painted a dire picture for US soya bean exports which ...
Friday, 30 November 18
GOVT MULLS REQUIRING MINERS TO TURN COAL INTO GAS - THE JAKARTA POST
The government is considering requiring all coal miners to turn the raw commodity into dimethylether (DME) as a substitute for liquefied petroleum ...
Friday, 30 November 18
SUPRAMAX: N. CHINA TO INDIA OR SE ASIA SUPRAS ARE GETTING PAID AROUND US$ 6000 - FEARNLEYS
Capesize
Sharp rise in spot activity and income, admittedly from very low levels, for the big ships. West Australia/China and Brazil/Far East b ...
Thursday, 29 November 18
NEW IMSBC CODE REQUIREMENTS AIM TO CONTROL LIQUEFACTION OF COAL CARGOES - GARD
KNOWLEDGE TO ELEVATE
The International Maritime Solid Bulk Cargoes (IMSBC) Code describes coal as a natural, solid, combustible material consi ...
Wednesday, 28 November 18
SHIPPING MARKET INSIGHT - GEORGE LAIOS
Last week I had the privilege to attend the SingularityU Greece Summit, in Athens. It was a privilege because you do not often have the chance to s ...
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- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- CIMB Investment Bank - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Latin American Coal - Colombia
- Kepco SPC Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- GVK Power & Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Madhucon Powers Ltd - India
- Georgia Ports Authority, United States
- Goldman Sachs - Singapore
- Kideco Jaya Agung - Indonesia
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Minerals Council of Australia
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The University of Queensland
- Simpson Spence & Young - Indonesia
- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
- Leighton Contractors Pty Ltd - Australia
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Formosa Plastics Group - Taiwan
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chamber of Mines of South Africa
- Jindal Steel & Power Ltd - India
- Riau Bara Harum - Indonesia
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Ambuja Cements Ltd - India
- Essar Steel Hazira Ltd - India
- LBH Netherlands Bv - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Australian Coal Association
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Samtan Co., Ltd - South Korea
- Ministry of Mines - Canada
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- MS Steel International - UAE
- Altura Mining Limited, Indonesia
- Savvy Resources Ltd - HongKong
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Bayan Resources Tbk. - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Borneo Indobara - Indonesia
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Indian Energy Exchange, India
- Sinarmas Energy and Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kobexindo Tractors - Indoneisa
- Binh Thuan Hamico - Vietnam
- Tata Chemicals Ltd - India
- Toyota Tsusho Corporation, Japan
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- GN Power Mariveles Coal Plant, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- Baramulti Group, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- SMG Consultants - Indonesia
- Bhushan Steel Limited - India
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Kapuas Tunggal Persada - Indonesia
- Malabar Cements Ltd - India
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Attock Cement Pakistan Limited
- Rashtriya Ispat Nigam Limited - India
- Heidelberg Cement - Germany
- Manunggal Multi Energi - Indonesia
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- Posco Energy - South Korea
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