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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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Wednesday, 24 October 18
MARKET INSIGHT - NASSOS SOULAKIS
Looking at 2018 SnP activity, it is evident that Greek, Chinese and North European (German and Norwegian) owners are the top buying nationalities, ...
Wednesday, 24 October 18
CHINESE POWER PLANT STOCKPILES AT HIGHEST LEVEL SINCE 2015 - JEFFREY LANDSBERG
Chinese power plant coal stockpiles have climbed to approximately 83.3 million tons as of the middle of this month, said Jeffrey Landsberg in his e ...
Tuesday, 23 October 18
WILL THE U.S. COAL DECLINE CONTINUE? - FORBES
What’s Trump’s new coal proposal?
Adding to its controversial plan to leverage federal authority to keep retiring baselo ...
Monday, 22 October 18
CONTINUED HIGH LNG PRICES; TRADE WAR IMPACT LIMITED - FITCH RATINGS
Fitch Ratings expects sustained high spot liquefied natural gas (LNG) and contract prices over the next two quarters on limited investment in LNG e ...
Monday, 22 October 18
WINTER OIL MARKET OUTLOOK - OPEC
The oil market in the winter season is generally characterized by demand for diesel, particularly in the northern hemisphere, leaving product marke ...
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- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Karaikal Port Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Coastal Gujarat Power Limited - India
- Essar Steel Hazira Ltd - India
- Power Finance Corporation Ltd., India
- Makarim & Taira - Indonesia
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- Vizag Seaport Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- The University of Queensland
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- IHS Mccloskey Coal Group - USA
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Indian Oil Corporation Limited
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Aditya Birla Group - India
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bayan Resources Tbk. - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Chettinad Cement Corporation Ltd - India
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- Wilmar Investment Holdings
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- Coal and Oil Company - UAE
- Leighton Contractors Pty Ltd - Australia
- PTC India Limited - India
- Economic Council, Georgia
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Coalindo Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Eastern Energy - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
- Global Green Power PLC Corporation, Philippines
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- Kideco Jaya Agung - Indonesia
- Mintek Dendrill Indonesia
- Attock Cement Pakistan Limited
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Mjunction Services Limited - India
- Planning Commission, India
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Intertek Mineral Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Edison Trading Spa - Italy
- Iligan Light & Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Price Waterhouse Coopers - Russia
- Videocon Industries ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Metalloyd Limited - United Kingdom
- White Energy Company Limited
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Central Java Power - Indonesia
- Parliament of New Zealand
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Australian Coal Association
- Energy Development Corp, Philippines
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Miang Besar Coal Terminal - Indonesia
- Carbofer General Trading SA - India
- Altura Mining Limited, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bangladesh Power Developement Board
- Romanian Commodities Exchange
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Sarangani Energy Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Kepco SPC Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- SMC Global Power, Philippines
- Kapuas Tunggal Persada - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- GMR Energy Limited - India
- Ministry of Mines - Canada
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Pendopo Energi Batubara - Indonesia
- Globalindo Alam Lestari - Indonesia
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- London Commodity Brokers - England
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
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