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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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Tuesday, 27 November 18
PANAMAX AND SUPRAMAX INDICES WITNESSED A DECLINE OF JUST BELOW 14% IN THEIR MEAN ON A MONTH-ON-MONTH COMPARISON - ALLIED SHIPPING
A month of sharp corrections and great asymmetries for the dry bulk sector, with the overall overview of the market shipping rapidly from a state o ...
Monday, 26 November 18
SUPRAMAX: THE ASIAN MARKET STALLED THIS WEEK WITH A BUILD-UP OF TONNAGE - BALTIC BRIEFING
Capesize
It was a positive end to the week, with West Australia/China making significant gains and firing owners’ resolve. There was talk ...
Friday, 23 November 18
GOLDEN ENERGY'S POTENTIAL ACQUISITION OF STANMORE CREDIT POSITIVE - FITCH RATINGS
Golden Energy and Resources Limited's (GEAR, B+/Positive) potential acquisition of Stanmore Coal will help the company diversify its coal opera ...
Friday, 23 November 18
ASSOCIATION CALLS FOR REVISION OF DMO SCHEME FOR COAL - JP
The Indonesian Coal Mining Association (APBI) has called on the government to revise the domestic market obligation (DMO) scheme for coal, which re ...
Friday, 23 November 18
INDONESIA'S REVENUES FROM MINERAL AND COAL INCREASE TO US$ 2.858 BILLION - ANTARA
Indonesia`s non-tax state revenues from the mineral and coal sub-sector reached Rp 41.77 trillion (approximately US$ 2.858 Billion) as of Nov 16, 2 ...
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- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Planning Commission, India
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Marubeni Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Kepco SPC Power Corporation, Philippines
- Indika Energy - Indonesia
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Australian Coal Association
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Anglo American - United Kingdom
- Altura Mining Limited, Indonesia
- Interocean Group of Companies - India
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- Indian Energy Exchange, India
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- Essar Steel Hazira Ltd - India
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- Parry Sugars Refinery, India
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Uttam Galva Steels Limited - India
- Samtan Co., Ltd - South Korea
- White Energy Company Limited
- Bhushan Steel Limited - India
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Lanco Infratech Ltd - India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- PTC India Limited - India
- ASAPP Information Group - India
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Siam City Cement - Thailand
- Formosa Plastics Group - Taiwan
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- Karaikal Port Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Power Finance Corporation Ltd., India
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Sindya Power Generating Company Private Ltd
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Neyveli Lignite Corporation Ltd, - India
- New Zealand Coal & Carbon
- Gujarat Electricity Regulatory Commission - India
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Binh Thuan Hamico - Vietnam
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- GMR Energy Limited - India
- Jaiprakash Power Ventures ltd
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- Medco Energi Mining Internasional
- Sical Logistics Limited - India
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Mercuria Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Meralco Power Generation, Philippines
- Intertek Mineral Services - Indonesia
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Trasteel International SA, Italy
- Bulk Trading Sa - Switzerland
- Rio Tinto Coal - Australia
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Mintek Dendrill Indonesia
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Central Electricity Authority - India
- Australian Commodity Traders Exchange
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- London Commodity Brokers - England
- Xindia Steels Limited - India
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
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