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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, 13 November 18
INDIA: POWER DEMAND UP; COAL STOCKS AT MINES AT A 5-YEAR LOW - FINANCIAL EXPRESS
Stocks at Coal India mines plunged to a five-year low of 21 million tonne (mt) in October, as a sudden surge in demand for the fuel from the power ...
Monday, 12 November 18
COAL BUSINESS REMAINS PROSPECTIVE - ANTARA
Coal business happened to be sluggish in the 2012-2015 period because coal prices in the world market fell sharply, but it has begun to crawl up si ...
Monday, 12 November 18
INDONESIA'S HBA ENDS DECLINE IN NOVEMBER
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
Wednesday, 07 November 18
SHIPPING MARKET INSIGHT - VASILIS MOIRIS
This has been another active week in the second-hand market for both the dry bulk and tanker sectors. Buying interest has recently increased, which ...
Monday, 05 November 18
TIGHTER FUEL RULES COULD RAISE SHIPOWNERS' COSTS AND CAPEX - FITCH RATINGS
More stringent fuel regulations regarding sulphur content could significantly increase global shipping companies’ operating costs and capex n ...
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- Coal and Oil Company - UAE
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Metalloyd Limited - United Kingdom
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- PNOC Exploration Corporation - Philippines
- Borneo Indobara - Indonesia
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- Globalindo Alam Lestari - Indonesia
- Indian Energy Exchange, India
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Videocon Industries ltd - India
- Kartika Selabumi Mining - Indonesia
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Straits Asia Resources Limited - Singapore
- Madhucon Powers Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Intertek Mineral Services - Indonesia
- Attock Cement Pakistan Limited
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Essar Steel Hazira Ltd - India
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Uttam Galva Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Billiton Holdings Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- Mercuria Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Interocean Group of Companies - India
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- White Energy Company Limited
- Gujarat Sidhee Cement - India
- CNBM International Corporation - China
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Maheswari Brothers Coal Limited - India
- Bharathi Cement Corporation - India
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Global Business Power Corporation, Philippines
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Simpson Spence & Young - Indonesia
- Binh Thuan Hamico - Vietnam
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Therma Luzon, Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Ambuja Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- Planning Commission, India
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Wilmar Investment Holdings
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- Larsen & Toubro Limited - India
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Lanco Infratech Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Siam City Cement PLC, Thailand
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Wood Mackenzie - Singapore
- Leighton Contractors Pty Ltd - Australia
- Marubeni Corporation - India
- Posco Energy - South Korea
- Semirara Mining and Power Corporation, Philippines
- Star Paper Mills Limited - India
- Vedanta Resources Plc - India
- London Commodity Brokers - England
- Aditya Birla Group - India
- Eastern Coal Council - USA
- Australian Commodity Traders Exchange
- Mercator Lines Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Edison Trading Spa - Italy
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Siam City Cement - Thailand
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Petron Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Makarim & Taira - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- International Coal Ventures Pvt Ltd - India
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
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