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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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Thursday, 22 November 18
SHUT OUT OF CHINA, U.S. COAL EXPORTERS FIND FAVOUR IN INDIA, FOR NOW - REUTERS
U.S. coal exporters have effectively lost a promising market in China since the imposition of tariffs as part of the ongoing trade dispute, but so ...
Wednesday, 21 November 18
SHIPPING MARKET INSIGHT - DIMITRIS KOURTESIS
Halfway through the fourth and last quarter of the year, we spot a significant change in freight rates for tankers trading dirty, as well as on the ...
Tuesday, 20 November 18
FREIGHT RATES IN THE CRUDE OIL MARKET HAVE ALREADY PICKED UP OVER THE PAST COUPLE OF WEEKS - YIANNIS VAMVAKAS
Current geopolitical developments between Iran and the US, which have led the latter to re-impose its sanctions, have significantly affected oil pr ...
Tuesday, 20 November 18
GOLDEN ENERGY AND RESOURCES LEADS A$249M BID FOR AUSTRALIA-LISTED STANMORE COAL - THE STRAITS TIMES
Singapore-listed Golden Energy and Resources (GEAR) is leading deals worth up to A$249 million (S$250 million) to acquire Australia-listed Stanmore ...
Monday, 19 November 18
INDONESIA'S LEADING EIGHT COAL MINER'S COAL MINING CONTRACTS ARE EXPECTED TO EXPIRE BETWEEN YEAR 2019 - 2025
The Ministry of Energy and Mineral Resources (ESDM) said, eight Coal Contract of Works (CCoW) will expected to expire between 2019 to 2026, Liputan ...
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- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Karbindo Abesyapradhi - Indoneisa
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- GMR Energy Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Petron Corporation, Philippines
- Attock Cement Pakistan Limited
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Straits Asia Resources Limited - Singapore
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Carbofer General Trading SA - India
- Planning Commission, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- PNOC Exploration Corporation - Philippines
- MS Steel International - UAE
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- ICICI Bank Limited - India
- Independent Power Producers Association of India
- Sakthi Sugars Limited - India
- Dalmia Cement Bharat India
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- San Jose City I Power Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- GAC Shipping (India) Pvt Ltd
- PowerSource Philippines DevCo
- Commonwealth Bank - Australia
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Indika Energy - Indonesia
- Ambuja Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- McConnell Dowell - Australia
- Semirara Mining and Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Grasim Industreis Ltd - India
- Jaiprakash Power Ventures ltd
- Kaltim Prima Coal - Indonesia
- Vedanta Resources Plc - India
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- Lanco Infratech Ltd - India
- White Energy Company Limited
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Bukit Makmur.PT - Indonesia
- Siam City Cement - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- Standard Chartered Bank - UAE
- Australian Coal Association
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Indian Oil Corporation Limited
- Neyveli Lignite Corporation Ltd, - India
- Power Finance Corporation Ltd., India
- Agrawal Coal Company - India
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Anglo American - United Kingdom
- Interocean Group of Companies - India
- Leighton Contractors Pty Ltd - Australia
- Wilmar Investment Holdings
- Sree Jayajothi Cements Limited - India
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- Rio Tinto Coal - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- PTC India Limited - India
- Xindia Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- European Bulk Services B.V. - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Uttam Galva Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
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