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