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