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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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- Sarangani Energy Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Parliament of New Zealand
- The University of Queensland
- Ambuja Cements Ltd - India
- Energy Development Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Parry Sugars Refinery, India
- Bayan Resources Tbk. - Indonesia
- Rio Tinto Coal - Australia
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Indika Energy - Indonesia
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Kartika Selabumi Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Uttam Galva Steels Limited - India
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karaikal Port Pvt Ltd - India
- Attock Cement Pakistan Limited
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Billiton Holdings Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- PowerSource Philippines DevCo
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Tamil Nadu electricity Board
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Mintek Dendrill Indonesia
- Marubeni Corporation - India
- GVK Power & Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Anglo American - United Kingdom
- CNBM International Corporation - China
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Chettinad Cement Corporation Ltd - India
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Intertek Mineral Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Alfred C Toepfer International GmbH - Germany
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Global Business Power Corporation, Philippines
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Australian Coal Association
- Wood Mackenzie - Singapore
- Ministry of Transport, Egypt
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Malabar Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Siam City Cement PLC, Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Electricity Generating Authority of Thailand
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- Petron Corporation, Philippines
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Sical Logistics Limited - India
- London Commodity Brokers - England
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indonesian Coal Mining Association
- Bukit Makmur.PT - Indonesia
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Essar Steel Hazira Ltd - India
- Dalmia Cement Bharat India
- Xindia Steels Limited - India
- Georgia Ports Authority, United States
- Sakthi Sugars Limited - India
- Borneo Indobara - Indonesia
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Jindal Steel & Power Ltd - India
- San Jose City I Power Corp, Philippines
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Mercuria Energy - Indonesia
- Interocean Group of Companies - India
- Goldman Sachs - Singapore
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Trasteel International SA, Italy
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- Eastern Energy - Thailand
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
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