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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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Monday, 29 October 18
IMPLEMENTATION OF SULPHUR 2020 LIMIT - CARRIAGE BAN ADOPTED - IMO
An amendment to support consistent implementation of the forthcoming 0.50% limit on sulphur in ships fuel oil was adopted by the International Mari ...
Monday, 29 October 18
SUPRAMAX: THE ASIAN AREA SAW FALLING RATES, WITH A 61,000DWT FIXING DELIVERY KOHSICHANG TRIP VIA INDONESIA, REDELIVERY INDIA, AT $10,500 - BALTIC BRIEFING
Capesize
A market of two halves for most of the week with rates in the Atlantic firming and easing in the East for most of the week, but then, ...
Friday, 26 October 18
SHIP OPERATING COSTS EXPECTED TO RISE IN 2018 AND 2019 - MOORE STEPHENS
Total vessel operating costs in the shipping industry are expected to rise by 2.7% in 2018 and by 3.1% in 2019, according to our latest survey.
...
Friday, 26 October 18
SEVERAL CONTRACTIONS IN GLOBAL STEEL PRODUCTION - JEFFREY LANDSBERG
World Steel Association data released today shows that global crude steel production totaled approximately 151.7 million tons in September. T ...
Thursday, 25 October 18
WHAT DOES THE "IMO 2020" REGULATION REALLY SAY? A QUICK GUIDE - BIMCO
KNOWLEDGE TO ELEVATE
The shipping industry has all eyes firmly fixed on the topic, but what exactly do the “IMO 2020” global sulph ...
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- Indonesian Coal Mining Association
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- The State Trading Corporation of India Ltd
- Banpu Public Company Limited - Thailand
- Commonwealth Bank - Australia
- Globalindo Alam Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Singapore Mercantile Exchange
- Aboitiz Power Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- LBH Netherlands Bv - Netherlands
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- White Energy Company Limited
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Mines - Canada
- Deloitte Consulting - India
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Bukit Makmur.PT - Indonesia
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- GN Power Mariveles Coal Plant, Philippines
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Bhushan Steel Limited - India
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Indika Energy - Indonesia
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Rashtriya Ispat Nigam Limited - India
- Sical Logistics Limited - India
- Mercator Lines Limited - India
- Planning Commission, India
- Straits Asia Resources Limited - Singapore
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Coal and Oil Company - UAE
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- Riau Bara Harum - Indonesia
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Coalindo Energy - Indonesia
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Oil Corporation Limited
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Attock Cement Pakistan Limited
- Binh Thuan Hamico - Vietnam
- Heidelberg Cement - Germany
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- AsiaOL BioFuels Corp., Philippines
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- Karaikal Port Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bharathi Cement Corporation - India
- Therma Luzon, Inc, Philippines
- SMG Consultants - Indonesia
- Metalloyd Limited - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Bhatia International Limited - India
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- IEA Clean Coal Centre - UK
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Interocean Group of Companies - India
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- Jorong Barutama Greston.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Sree Jayajothi Cements Limited - India
- Essar Steel Hazira Ltd - India
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Aditya Birla Group - India
- Manunggal Multi Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- Global Green Power PLC Corporation, Philippines
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Wilmar Investment Holdings
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- Offshore Bulk Terminal Pte Ltd, Singapore
- PTC India Limited - India
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- ASAPP Information Group - India
- Edison Trading Spa - Italy
- VISA Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Gujarat Sidhee Cement - India
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
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