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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, 17 October 18
SHIPPING MARKET INSIGHT - TIMOS PAPADIMITRIOU
In the last three months approximately 72 tankers changed hands involving ships larger than 33kdwt up to VLCC. 43 of those vessels had to do ...
Tuesday, 16 October 18
A PRACTICAL OVERVIEW OF THE IMO 2020 SULPHUR CAP - CLYDE&CO
KNOWLEDGE TO ELEVATE
With less than eighteen months before Regulation 14.1.3 of Annex VI of the MARPOL Convention comes into effect, there are ...
Saturday, 13 October 18
SUPRAMAX: SIGNIFICANT ACTIVITY IN THE INDIAN OCEAN WAS EVIDENT AND RATES JUMPED - BALTIC BRIEFING
Capesize
A sharp reversal of fortunes for the big ships as the week closed after a depressed beginning. To start with drops were sudden, with t ...
Wednesday, 10 October 18
SHIPPING MARKET INSIGHT - ILIAS M. LALAOUNIS
During the end of last month the BHSI was hovering around 630 points, while the last observed sale on a 10-yr old Japanese Handy was the M/V Van Im ...
Monday, 08 October 18
INDONESIAN THERMAL COAL PRICE REFERENCE FELL 3.74% IN OCTOBER 2018
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- India Bulls Power Limited - India
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- Baramulti Group, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- Indika Energy - Indonesia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Iligan Light & Power Inc, Philippines
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Independent Power Producers Association of India
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sojitz Corporation - Japan
- Kumho Petrochemical, South Korea
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- Mintek Dendrill Indonesia
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Binh Thuan Hamico - Vietnam
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Intertek Mineral Services - Indonesia
- Global Business Power Corporation, Philippines
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Samtan Co., Ltd - South Korea
- Heidelberg Cement - Germany
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
- Karbindo Abesyapradhi - Indoneisa
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Sical Logistics Limited - India
- Latin American Coal - Colombia
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Attock Cement Pakistan Limited
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- Agrawal Coal Company - India
- MS Steel International - UAE
- Cement Manufacturers Association - India
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- AsiaOL BioFuels Corp., Philippines
- Formosa Plastics Group - Taiwan
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Indian Energy Exchange, India
- Sarangani Energy Corporation, Philippines
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Parry Sugars Refinery, India
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- The State Trading Corporation of India Ltd
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Economic Council, Georgia
- Kohat Cement Company Ltd. - Pakistan
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- SN Aboitiz Power Inc, Philippines
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- Simpson Spence & Young - Indonesia
- International Coal Ventures Pvt Ltd - India
- Madhucon Powers Ltd - India
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Bharathi Cement Corporation - India
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Rio Tinto Coal - Australia
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining Corp, Philippines
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Kobexindo Tractors - Indoneisa
- SMG Consultants - Indonesia
- Grasim Industreis Ltd - India
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- Kideco Jaya Agung - Indonesia
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- GMR Energy Limited - India
- PowerSource Philippines DevCo
- Chamber of Mines of South Africa
- PTC India Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
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